Duna DefAi

Tax Report

Crypto Tax Analysis and Savings Report for Idaho – Single Filer

Below is your detailed four-step plan for understanding tax liability, potential savings strategies, revised crypto tax calculation, and investment suggestions.

Executive Summary

For Tax Year 2024 (file due April 2025), based on your current figures:

  • Short-Term Capital Gains (STCG): $297,357
  • Long-Term Capital Gains (LTCG): $410,242
  • Other Income: $490,088
  • Location: Idaho (State Tax: Tiered rates up to 6.5%)
  • Filing Status: Single

Idaho follows federal guidance for capital gains but imposes additional state income tax. This analysis finds that significant tax liability arises from federal and state obligations at a peak bracket due to your high income. However, optimization through deductions and investment strategies can help reduce this considerably.

Step 1: Calculate Crypto Tax Liability

1. Federal Short-Term Capital Gains Tax (STCG)

Short-term gains are taxed as ordinary income at the federal level:

  • Total Taxable Income = STCG ($297,357) + LTCG ($410,242) + Income ($490,088) = $1,197,687

Reviewing the 2024 Federal Tax Brackets for single filers:

  • Income above $609,350 is taxed at 37%.
    Applying the marginal rate:
  • STCG Tax = $297,357 × 37% = $109,022.09

2. Federal Long-Term Capital Gains Tax (LTCG)

LTCG is taxed at reduced rates (15%-20%), depending on taxable income:

  • For income > $518,900, LTCG rate = 20%.
  • LTCG Tax = $410,242 × 20% = $82,048.40

3. Idaho State Income Tax

Idaho applies a top rate of 6.5% for incomes above $17,891 (2024).

  • State Tax on Total Income ($1,197,687):
    • STCG State Tax = $297,357 × 6.5% = $19,828.20
    • LTCG State Tax = $410,242 × 6.5% = $26,666.53

4. Federal Ordinary Income Tax on Wages ($490,088)

Using the tiered system:

  • Applicable tax = $490,088 taxed at marginal 37%.
  • Tax = $490,088 × 37% = $181,732.56

5. Total Tax Liability (Pre-Savings)

  • Federal Tax: $109,022.09 (STCG) + $82,048.40 (LTCG) + $181,732.56 (Income) = $372,803.05
  • State Tax: $19,828.20 (STCG) + $26,666.53 (LTCG) = $46,494.73
  • Total Tax = $372,803.05 + $46,494.73 = $419,297.78

Step 2: Strategic Tax Saving Recommendations

  1. Utilize Tax Loss Harvesting:
    Offset your STCG with realized capital losses from poorly performing crypto investments or stocks. Example: Selling crypto with unrealized losses can reduce taxable STCG directly.

  2. Switch to Long-Term Strategy:
    Gradually convert short-term positions into long-term positions. Gains held for over 1 year are taxed at a max rate of 20%, compared to 37% for STCG.

  3. Charitable Contributions of Appreciated Crypto:

Donate appreciated crypto directly to a qualified charity to gain a fair market value deduction, bypassing STCG/LTCG taxes entirely. For example, donating $50,000 in LTCG assets could save ~$10,000 federal tax liability and ~$3,250 in state taxes.

  1. Maximize Retirement Contributions:
    Reduce taxable income by contributing to a Solo 401(k), SEP-IRA, or traditional IRA. For example, a $22,500 investment could lower taxable income and save approximately ~$9,000 in federal and state taxes.

  2. Opportunity Zone Investments:
    Defer capital gains via Qualified Opportunity Zone Funds (QOFs). Rolling $100,000 LTCG into a QOF may defer/decrease taxable income and eliminate future capital gains tax if held for 10 years.

  3. Deduct Mining/Business Expenses:

If involved in activities like crypto trading/mining as a sole proprietor, deduct:

  • Electricity costs
  • Trading platform fees
  • Hardware or systems depreciation

Step 3: Revised Tax Savings Projection

Post-Deductions and Optimized Plan:

1. Applying $50,000 Loss Harvesting:

  • STCG Reduced to = $297,357 – $50,000 = $247,357
  • LTCG Unchanged = $410,242

2. Contributions to Traditional IRA ($22,500):

  • Adjusted Income = $490,088 – $22,500 = $467,588

3. Charitable Crypto Donation ($50,000 LTCG):

  • LTCG Reduced to = $410,242 – $50,000 = $360,242

Revised Tax Liability Calculation (Post-Savings):

  • Federal STCG Tax (Adjusted): $247,357 × 37% = $91,523.09
  • Federal LTCG Tax (Adjusted): $360,242 × 20% = $72,048.40
  • Federal Income Tax (Adjusted): $467,588 × 37% = $172,008.56
  • State Tax (Adjusted):
    • STCG State Tax = $247,357 × 6.5% = $16,078.20
    • LTCG State Tax = $360,242 × 6.5% = $23,415.53

Total Tax (Adjusted):
$91,523.09 (STCG) + $72,048.40 (LTCG) + $172,008.56 (Income) + $39,493.73 (State) = $375,073.78

Tax Savings:

  • Initial Tax: $419,297.78
  • Adjusted Tax: $375,073.78
  • Savings: $44,224 (10.54%)

  1. Tax-Deferred Accounts: Contribute aggressively to IRAs or HSAs for additional tax savings.

  2. Staking with Tax-Loss Adjustments: Participate in staking programs but track rewards as ordinary income. Defer/reclaim losses via loss harvesting.

  3. Qualified Opportunity Zone Funds: Invest in neighborhoods designated for economic improvement, allowing you to defer and later potentially eliminate CGT.

  1. Long-Term Crypto Positions: Reassess HODLing strategies to minimize short-term transactions.

  2. Charity and Philanthropy: For high-tax years, donate crypto directly to nonprofits to leverage double tax benefits.

Action Plan: Next Steps

  1. Harvest losses by disposing of underperforming assets before December 31, 2024.
  2. Contribute to IRAs or similar tax-advantaged accounts to reduce Adjusted Gross Income (AGI).
  3. Allocate top LTCG sources to donation strategies to bypass income inclusion.
  4. Consult with a tax advisor or CPA specialized in crypto to ensure precise execution of planned adjustments and maximize savings.

By implementing the above, you could not only reduce tax liability but potentially reinvest savings to grow your wealth more effectively, all while staying compliant with IRS regulations.

End of Report

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