Duna DefAi

Tax Report

Tax Analysis and Savings Report

Executive Summary

Based on the provided information, you have:

  1. Short-Term Capital Gain: $484,581
  2. Long-Term Capital Gain: $682,819
  3. Ordinary Income: $707,992
  4. Filing Location: Connecticut (state income tax applies).
  5. Filing Status: Single

Your primary concern is managing the federal tax on both income and capital gains, as well as Connecticut’s state tax. This detailed report will guide you through tax assessment, potential deductions, revised calculations, and actionable savings strategies.

Step 1: Tax Liability Analysis

1. Federal Income Tax Calculation (Ordinary Income)

The federal tax brackets for 2025 (Single Status) are as follows:

Tax Rate Income Range Tax Payable
10% $0 – $11,925 $1,192.50
12% $11,926 – $48,475 $4,385.88
22% $48,476 – $103,350 $12,046.28
24% $103,351 – $197,300 $22,580.64
32% $197,301 – $250,525 $17,040.64
35% $250,526 – $626,350 $131,546.7
37% Above $626,350 $30,207.44

Calculation:
Since your total income is $707,992:

  • Tax for income up to $626,350 = $188,722.64
  • Tax for income above $626,350 ($81,642 x 37%) = $30,207.44

Total Federal Income Tax = $218,930.08

2. Tax on Short-Term Capital Gains (STCG)

Short-term capital gains are taxed at your ordinary income tax rate. Adding STCG to ordinary income ($707,992 + $484,581 = $1,192,573), the income exceeding $626,350 faces a 37% tax.

  • Tax on short-term gains: $484,581 x 37% = $179,295.97

3. Tax on Long-Term Capital Gains (LTCG)

LTCG is taxed at favorable rates (15% or 20%).
For $682,819 LTCG with income exceeding $491,300 (threshold for 20% rate):

  • First $7,774 taxed at 15% = $1,166.1
  • Remaining $675,045 taxed at 20% = $135,009

Total LTCG Tax = $136,175.1

4. Connecticut State Tax (6.99%)

  • Taxable total (Income + STCG + LTCG) = $1,875,392
  • CT State Tax = $1,875,392 x 6.99% = $131,035.93

Summary of Initial Tax Calculation:

  • Federal Income Tax: $218,930.08
  • ST Capital Gains Tax: $179,295.97
  • LT Capital Gains Tax: $136,175.1
  • Connecticut State Tax: $131,035.93
  • Total Tax Liability: $665,437.08

Post-Tax Profit = $1,875,392 – $665,437.08 = $1,209,954.92
Tax as a Percentage of Total Profits: 35.48%

Step 2: Recommendations for Tax Savings

1. Optimize Income and Deductions

  • Maximize Retirement Contributions: Contribute to a Traditional IRA or 401(k) to reduce taxable income. For 2025, the limit is $22,500 ($30,000 if over 50).
  • Health Savings Account (HSA): Deduct up to $3,850 for singles ($7,750 for family).

2. Capitalize on Tax Loss Harvesting

  • Offset STCG or LTCG with crypto losses from underperforming assets. No gains? Deduct $3,000 against income and carry forward the remaining loss.

3. Charitable Donations

  • Donate appreciated crypto to qualified charities. This allows a deduction for FMV while avoiding the gains tax.

4. Use Specific Identification Method

  • Opt for Highest-In-First-Out (HIFO) to minimize STCG by prioritizing the costly assets for sales.

5. Invest in Opportunity Zones

  • Defer capital gains tax by reinvesting in Qualified Opportunity Funds, potentially reducing LTCG liability.

Step 3: Revised Tax Calculation with Strategies

Adjustments:

  • Contributions to 401(k) = $22,500
  • HSA Contributions = $3,850
  • Charitable Donations = $50,000 (avoid LTCG taxation).
  • Tax Loss Harvesting = Offset $15,000 in STCG losses.

Updated Taxable Values:

  1. Revised Income Tax:
    Taxable income reduced ($707,992 – $22,500 – $3,850) = $681,642

    • Federal tax recalculated to $209,749.44

  2. Revised STCG Tax:
    Offsetting $15,000 losses, taxable STCG = $469,581 x 37% = $173,745.97

  3. Revised LTCG Tax:

After charity adjustment, taxable LTCG = $632,819

  • Up to $7,774 taxed at 15% = $1,166.10
  • Remaining $625,045 taxed at 20% = $125,009
    Revised LTCG Tax = $126,175.1
  1. Revised Connecticut Tax:
    Taxable total reduced = $1,810,392
    • CT State Tax reduced = $126,587.45

Revised Total Tax Estimate:

  • Federal Income Tax: $209,749.44
  • ST Capital Gains Tax: $173,745.97
  • LT Capital Gains Tax: $126,175.10
  • Connecticut State Tax: $126,587.45
  • Total Revised Tax Liability: $636,257.96

Revised Post-Tax Profit = $1,875,392 – $636,257.96 = $1,239,134.04
Tax Percentage Reduced to 33.91%
Savings Achieved = $665,437.08 – $636,257.96 = $29,179.12

Step 4: Strategic Tax-Saving Investments

  1. Maximize Use of IRAs and HSAs: Fully leverage the tax-deferred/growth aspects of these accounts.

  2. Tax-Efficient Crypto Investing:

    • Hold assets to qualify for LTCG rates (1+ year).
    • Sell poorly performing crypto to harvest tax losses.

  3. Fund Opportunity Zones: Explore strategic participation in Qualified Opportunity Funds for significant tax-deferral benefits.

  4. Donations: Explore further charitable donations to reduce LTCG/ordinary income liabilities.

  5. Municipal Bonds: Invest in municipal bonds to generate tax-free income, especially for state taxes.

  6. Track-specific-method: For 2025, use HIFO or Spec ID to optimize future asset disposals.

Action Plan

  1. Consolidate crypto records for Specific ID tracking with supported tools like Koinly or ZenLedger.
  2. Maximize 2025 deductions early (IRA, HSA, etc.) and align charitable efforts for optimized savings.
  3. Meet with a financial advisor to strategize Opportunity Fund Investments or other tax-advantaged portfolios.

With these steps, you reduce your tax liability while boosting after-tax profits and achieving compliance with tax regulations effectively!

Dex