6 Crypto Tax Loopholes in 2025 (Save Thousands)

In this guide, we’ll outline six simple strategies that can potentially help you legally save thousands of dollars on your tax bill!

#1: Hold your cryptocurrency 

The easiest way to avoid taxes on cryptocurrency is simply to hold. 

Remember, there’s no tax for holding cryptocurrency. You only pay taxes when you dispose of it or earn crypto income.

#2: Harvest your crypto losses 

Losses from cryptocurrencies and other assets can be used to offset capital gains and up to $3,000 of income on your tax return. Any additional losses can be rolled forward into future tax years. 

Because of this, many investors choose to intentionally sell their cryptocurrency at a loss — a strategy known as tax-loss harvesting!   

While tax-loss harvesting is not unique to cryptocurrency, crypto has some advantages over other asset classes. The wash sale rule states that you can’t claim capital losses on securities — such as stocks — if you buy them back within 30 days of a sale. 

Currently, cryptocurrency is not considered a security by the IRS. As a result, most tax professionals agree that the wash sale rule does not currently apply to crypto. That means that you can sell your cryptocurrency for a loss, buy your crypto back shortly after, and claim a loss on your tax return! 

#3: Contribute to retirement accounts 

Crypto Individual retirement accounts (IRAs) allow you to invest in cryptocurrency on a tax-free or tax-deferred basis! It’s a great option for investors who are looking to minimize taxes while holding crypto for the long-term. 

While most IRA providers don’t allow you to hold cryptocurrencies, self-directed IRA providers allow you to directly invest in assets like Bitcoin and Ethereum.

#4: Dispose of crypto after more than 12 months 

The American tax code is set up to encourage long-term investment. That means that if you hold cryptocurrency and other assets for longer than 12 months, the tax that you’ll pay on profits is significantly reduced! 

If you’re close to the 12 month mark, you may want to consider waiting a bit longer to sell your crypto to minimize your tax bill.

#5: Donate crypto to charity 

Donating cryptocurrency is one of the rare occasions when the IRS allows you to ‘double dip’ on tax benefits. 

Donating crypto can be treated as a deduction on your tax return and potentially reduce your tax bill! 

In addition, donating your cryptocurrency to charity is not considered a taxable disposal — meaning you won’t be required to pay capital gains tax even if the value of your crypto increased significantly since you originally received it!

#6: Cryptocurrency gifts 

Gifting cryptocurrency is not subject to tax in most circumstances. 

If you give less than $18,000 worth of cryptocurrency gifts to a single individual during the tax year, you don’t need to report your gifts to the IRS. 

While you are required to fill out a gift tax return if you give more than $18,000 in cryptocurrency gifts to a single person during the tax year, this does not come with a tax liability in most cases. Filling out a gift tax return is primarily for informational purposes.

You’ll only pay tax on giving gifts if you exceed the lifetime gift exemption threshold — currently at $13.61 million. 

Are crypto tax loopholes the source of the budget deficit? 

In recent years, the Biden Administration has singled out ‘crypto tax loopholes’ as a major source of the budget deficit. 

In 2023, the White House put out a Budget Plan that would introduce the wash sale rule to cryptocurrency. The White House claimed that closing this loophole would bring in $24 billion in tax revenue over 10 years. 

It’s not clear how the White House put together this estimate. According to cryptocurrency experts, it’s unlikely that closing the wash sale rule will generate billions of dollars in revenue. 

How does crypto tax work? 

Cryptocurrency, like other assets, is subject to tax. In the United States and most other countries, you’ll most likely pay capital gains tax and income tax on your cryptocurrency profits. 

Capital gains tax: When you dispose of crypto, you’ll incur a capital gain or loss. Cryptocurrency disposals include selling your crypto, trading it for another crypto, or using crypto to make a purchase! 

Income tax: When you earn cryptocurrency, you’ll recognize ordinary income tax. Examples of income include cryptocurrency mining and staking! 

What tax loopholes can I use for NFTs? 

Many of the strategies listed in this article can also be applied to reduce NFT taxes. For more NFT-specific strategies, check out our guide to NFT tax loopholes.