Duna DefAi

Tax Report

Crypto Tax Analysis and Savings Report for Tax Year 2024

Prepared for: Status: Single | Location: Indiana

Executive Summary:

This report provides a detailed breakdown of your estimated tax liability based on your declared Short-Term Capital Gain ($622,247), Long-Term Capital Gain ($349,670), and Regular Income ($619,493). It also outlines proposed strategies to reduce your taxable liability, achieve tax savings, and increase overall profit after taxes.

Indiana, a flat-tax state, imposes a 3.15% state income tax in 2024, applicable to both capital gains and income for a single filer. The federal tax liability is calculated based on the latest IRS guidance, including progressive federal income tax rates, capital gains tax rates, and applicable deductions.

This report consists of the following four steps:

  1. Initial tax computation.
  2. Strategies to reduce taxable income and optimize tax liabilities.
  3. Revised tax computation with proposed optimizations.
  4. Actionable investment and tax-saving strategies.

Step 1: Initial Tax Calculation

Using the data provided and 2024 rates, here’s a breakdown of your initial tax calculation:

Federal Income Tax Liability:

Since your regular Income ($619,493) is taxed progressively:

  • 10% on $0 – $11,600 = $1,160
  • 12% on $11,600 – $47,150 = $4,267
  • 22% on $47,150 – $100,525 = $11,767
  • 24% on $100,525 – $191,950 = $21,935
  • 32% on $191,950 – $243,725 = $16,567
  • 35% on $243,725 – $609,350 = $128,868
  • 37% on $10,143 (amount above $609,350) = $3,753

Federal Income Tax Total: $188,317

Federal Capital Gains Tax (Short-Term + Long-Term):

  1. Short-Term Capital Gains ($622,247 taxed as ordinary income):
    Added to your $619,493 income pushes total taxable income into the highest >$609,350 bracket.

    • Top Rate (37%): $622,247 × 37% = $230,231

  2. Long-Term Capital Gains ($349,670 taxed at 20%, highest slab):

    • $349,670 × 20% = $69,934

Federal Capital Gains Tax Total: $300,165

Indiana State Tax (Flat Rate 3.15%):

Applied on combined income + capital gains of ($1,591,410):

  • $1,591,410 × 3.15% = $50,187

Total Initial Tax Liability:

Federal Income Tax: $188,317
Federal Capital Gains Tax: $300,165
Indiana State Tax: $50,187
Total: $538,669

Net Profit After Tax:

Total Income & Gains: $1,591,410
Less Total Tax: $538,669
Net Profit: $1,052,741

Percent of Profit Paid in Taxes:

Tax Liability ÷ Total Income & Gains = 33.9%

Step 2: Strategies to Save Taxes

The following recommendations are aimed at reducing your taxable liability:

  1. Tax-Loss Harvesting:
    Offset your short-term and long-term gains by selling underperforming crypto or other investments to realize losses.

    • E.g., Harvest unrealized losses to offset your short-term gains of $622,247 fully or partially.

  2. Shift to Long-Term Holdings:

    • Significant savings can be achieved by holding crypto assets for over a year to qualify for the lower long-term capital gains rate (0%-20%), instead of the higher short-term gains (up to 37%).

  3. Maximize Itemized Deductions:

  • Charitable Donations: Donating appreciated cryptocurrency worth $100,000+ can eliminate taxes on gains and qualify for a charitable deduction. Proper documentation (Form 8283) required for IRS compliance.
  • Investment Expenses: Deduct any trading fees, interest on investment loans, or crypto-related business expenses.

  1. Utilize Retirement Accounts (Crypto IRAs):

    • Defer taxes by contributing to self-directed IRAs that support crypto investments. This can shelter current profits from taxation.

  2. Gifting Crypto:

    • Gift assets (up to $18,000 per recipient annually) tax-free, reducing your taxable base while retaining the asset’s appreciation for future taxation.

  3. Opportunity Zone Investments:

  • Reinvest up to $350,000 from your gains into Qualified Opportunity Zone Funds to defer or reduce capital gains tax.

Step 3: Revised Tax-Saving Calculation

Using the recommended strategies above, here’s a revised tax outlook with anticipated savings:

Federal Income Tax with Deductions:

Assume itemized deductions reduce taxable income by $100,000 (charitable donations, investment expenses). Adjusted income = $519,493:

  • Adjusted federal income tax liability = $145,517 (savings: $42,800).

Federal Capital Gains Tax Adjusted:

  1. Use $200,000 harvested losses to offset your short-term gains ($622,247):

    • $422,247 taxed at 37% = $156,231 (reduced from $230,231). Savings: $73,999.

  2. Long-term gains remain unchanged at 20% = $69,934.

Adjusted Federal Capital Gains Tax Total: $226,165

Indiana State Tax Adjusted:

With reduced taxable income and gains of $1,291,410:

  • $1,291,410 × 3.15% = $40,681 (savings: $9,506).

Revised Total Tax Liability:

Federal Income Tax: $145,517
Federal Capital Gains Tax: $226,165
Indiana Tax: $40,681
Revised Total Tax Liability: $412,363

Savings:

Initial Total Taxes ($538,669) – Revised Taxes ($412,363) = $126,306

Net Profit After Revised Tax:

$1,591,410 – $412,363 = $1,179,047

Percent Profit to Tax Reduced:

Revised Tax Rate = 412,363 ÷ 1,591,410 = 25.9% (down from 33.9%).

Step 4: Additional Investment Strategies

  1. Invest in Tax-Deferred Accounts:

    • Leverage crypto IRAs or 401(k) accounts to defer taxes on income or capital gains growth.

  2. Optimize Cost Basis:

    • Track crypto transactions using Highest In First Out (HIFO) or Spec ID for reduced taxable gains.

  3. Increase Donations:

  • Consider increasing crypto or stock donations to utilize charitable tax deductions further.

  1. Focus on Long-Term Holdings:

    • Align future trades to long-term capital gains thresholds.

  2. Opportunity Zone Funds:

    • Expand investments in underprivileged areas for future tax write-offs and community development.

Implementation Action Plan:

  1. Realize $200,000 in tax-harvesting crypto losses before end-of-year deadline.
  2. Donate $100,000+ to charities to claim deductions.
  3. Move eligible assets into a self-directed Crypto IRA/401(k) for tax deferral.
  4. Reinvest $350,000 into Qualified Opportunity Zone Funds.
  5. Identify top-performing assets for long-term holding (1+ year).

By implementing these strategies, you will achieve significant savings while building a long-term tax-efficient investment plan. Please consult a certified tax professional for tailored guidance.

Projected Tax Savings: $126,306.

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