Duna DefAi

Tax Report

Crypto Tax and Savings Analysis Report

Executive Summary

This report provides you, a Single filer residing in Florida for Tax Year 2024 (filing due April 2025), a step-by-step analysis of your crypto tax liability, savings opportunities, and an optimized tax plan. By implementing strategic deductions and investments, we aim to maximize your post-tax crypto profits while ensuring full compliance with U.S. tax laws. Below are the main breakdowns:

STEP 1: Process Input and Calculate Tax

Inputs:

  • Short-term capital gain (STCG): $199,014
  • Long-term capital gain (LTCG): $407,628
  • Income (non-crypto): $185,522
  • Filing Status: Single
  • State of Residence: Florida (no state income tax)

A) Federal Income Tax

Your non-crypto income of $185,522 places you in the 24% federal tax bracket for 2024.

  • Earnings are taxed as follows using standard rates:
    • First $11,600 taxed at 10% = $1,160
    • $11,601 to $47,150 taxed at 12% = $4,266
    • $47,151 to $100,525 taxed at 22% = $11,769
    • $100,526 to $185,522 taxed at 24% = $20,388

Total Federal Tax on Income = $37,583

B) Crypto Tax Breakdown

  • STCG ($199,014): Taxed as ordinary income per federal brackets above.

    • Taxable income with STCG = $185,522 + $199,014 = $384,536
    • Tax on STCG (marginal brackets apply):
      • First $243,725 taxed at escalating rates (10%-24%, covered above).
      • Remaining $384,536 – $243,725 = $140,811 taxed at 32% = $45,060.

    Total Federal Tax on STCG = $82,643

  • LTCG ($407,628): Taxed using long-term capital gains brackets:

    • Income + STCG exceeds $518,400, placing you in the 20% LTCG bracket.
    • Tax = $407,628 x 20% = $81,525.

C) Total Tax Liability

  • Federal Income Tax = $37,583

  • STCG Federal Tax = $82,643

  • LTCG Federal Tax = $81,525

  • Total Federal Tax Liability: $201,751

D) Profit After Tax

Profit Before Tax: $199,014 (STCG) + $407,628 (LTCG) = $606,642
Profit After Tax: $606,642 – $201,751 = $404,891
Percent of Profit Paid in Taxes: (201,751 ÷ 606,642) * 100 = 33.27%

STEP 2: Strategic Advice to Save Taxes

  1. Optimize Long-Term Holding to Reduce STCG:

    • Consider strategies to defer short-term capital gains by holding assets for over 12 months to qualify for lower long-term tax rates (15%-20% vs. 32%-37%).

  2. Tax-Loss Harvesting:

    • Offset taxable gains by realizing crypto losses. Sell underperforming coins for a loss to directly reduce both STCG and LTCG liabilities. Losses can offset up to $3,000 of ordinary income annually, and remaining losses can be carried forward.

  3. Utilize Tax-Advantaged Accounts:

  • Contribute to a Traditional or Crypto IRA to defer taxes on capital gains or investment returns. IRA withdrawals in retirement are subject to lower tax rates.

  1. Donate Appreciated Crypto:

    • Donate to qualified charities. You can deduct the fair market value of your donated crypto and avoid capital gains on its appreciation.

  2. Gifting Crypto:

    • Gift up to $18,000 of appreciated crypto per individual (in 2024) tax-free, reducing taxable income while benefiting family or friends.

  3. Cost Basis Strategy (HIFO Method):

  • Use the HIFO (Highest-In-First-Out) cost basis method. Sell the highest-cost assets first to reduce taxable profits.
  1. Invest in Opportunity Zone Funds:
    • Defer capital gains taxes and potentially reduce them (up to 10%) by investing in these funds, which bolster community development.

STEP 3: Revised Tax-Saving Calculation

Applying Strategies:

  • Tax-Loss Harvesting: Assuming $30,000 in realized crypto losses can offset your STCG.
  • Charitable Donation: Donating $50,000 of LTCG crypto reduces LTCG exposure by $50,000.
  • IRA Contributions: $6,500 max contribution reduces taxable income.

Revised Crypto Tax Breakdown:

  • Adjusted STCG: $199,014 – $30,000 = $169,014 (taxed at ordinary rates).
  • Adjusted LTCG: $407,628 – $50,000 = $357,628 (taxed at lower LTCG rates).

Federal Tax Reductions:

  • STCG Tax Savings: $30,000 offset = $9,600 saved (32% top tax rate).
  • LTCG Tax Savings: $50,000 x 20% = $10,000 saved.
  • IRA Contribution Savings: $6,500 x 24% marginal rate = $1,560.

Total Tax Savings: $9,600 + $10,000 + $1,560 = $21,160

Revised Total Tax Liability:

Initial Tax Liability: $201,751
Revised Tax Liability: $201,751 – $21,160 = $180,591

Revised Profit After Tax:

Profit After Tax: $606,642 – $180,591 = $426,051
Percent of Profit Paid in Taxes: (180,591 ÷ 606,642) * 100 = 29.76%

Savings Achieved:

Tax reduction: $201,751 – $180,591 = $21,160
Improved Profit After Tax: $426,051 – $404,891 = $21,160
Percentage Savings on Taxes: (21,160 ÷ 201,751) * 100 = 10.49%

STEP 4: Further Investment and Planning Recommendations

  1. Allocate Funds to Opportunity Zone Investments:

    • Substantial deferred and reduced tax benefits await for long-term investors.

  2. Increase Charitable Donations in Crypto:

    • Smart philanthropy maximizes deductions and eliminates LTCG obligations. Evaluate 501(c)(3) organizations for eligibility.

  3. Diversify Via Tax-Advantaged Accounts:

  • Contribute the maximum amount to Roth IRAs or HSAs (Health Savings Accounts) to optimize tax-free or tax-deferred growth.

  1. Set up Tax Planning Software:

    • Use tools like CoinTracker or KoinX to monitor gains/losses in real-time, ensuring timely tax loss harvesting.

  2. Maintain Detailed Records & Review Form 8949 Compliance:

    • Ensure all transactions are categorized under the correct tax structure to avoid IRS scrutiny.

Overview of Key Benefits

  • Tax Savings: $21,160
  • Improved ROI: Savings boost profit, reducing your overall tax percentage from 33.27% to 29.76%.
  • Proactive Planning: Employed deferral strategies, planned deductions, and gifting methods that can be implemented year-long.

By implementing these suggestions effectively, you can confidently optimize your tax approach, save more of your hard-earned crypto profits, and plan a financially secure roadmap for your future investments.

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