Avoid Paying Taxes on Cryptocurrency LEGALLY

Okay, loans and listings ask about cryptocurrency and how it's taxed. Now, believe it or not, I just crumpled it up and threw it over there. This is what a nerd I am. I was reading the IRS notice from 2014-21. Yes, that's still in my brain. I'm an idiot. Sorry. I'm a nerd. And I was reading the IRS publication, or I should say notice on cryptocurrency just today. Here's how this works, everybody going to do two options, A and B. And then we're going to break it into a 1 and a 2 and b 1 and b 2. All right? Okay, everybody, this is cool. Now let's say you were so freaking lucky enough like six years ago, eight years ago to buy cryptocurrency Bitcoin at 40 cents. Now it's worth 30,000 freaking dollars a coin. What? Now just in the last eight months to 12 months, it's gone from $3,000 a coin to 30,000 a coin. Tenfold increase. Right? Okay, if I'm going to call her Susie, I think this was. I'm going to go with a female name. It sounds like it was female in gender. So Susie says, mark, I bought cryptocurrency and I bought it for $1,000. I bought Bitcoin for $1,000. That is your basis. Whenever you. I'm going to put pp, that's your purchase price. So if any of you go out there and buy bitcoin. Now, I did a whole podcast today on how you do it. You got to set up an account with a wallet. Coinbase is probably the largest. You set up your wallet, you put money in, and then you go buy your bit, your bitcoin, ethereum, whatever you're going to buy. And then it sits there. If you go out and sell that Bitcoin for $2,000, you have a capital gain, so you have your purchase price and your sales price capital gain. If you held it less than 12 months, it's short term capital gain. If you held it greater than 12 months, it's long term capital gain. Now, I won't go into the differences there and how it's taxed, but that's your first option. Now, let's say Susie goes, well, I'm not going to sell it for cash. I'm going to go hire someone because people are now taking cryptocurrency as payment. And they go, I'm going to go hire someone to decorate my house and they're going to charge me $2,000 in cryptocurrency. Okay, so you, but your coin is now worth 2,000, but you don't turn it into dollars. You literally transfer your thousand dollars of bitcoin, your thousand bitcoin dollars or whatever virtual currency and pay someone fair market value, 2000. So see the difference here? The currency was actually worth 2000 when you paid someone. Is that a gain for Susie? Yes. Susie must pay tax because she traded it not for dollars, but for services that were worth $2,000. She has a gain. Now we could go on and on with Q and A. On option one, where you buy bitcoin, you resell it, you buy bitcoin, you use it for services. If it goes down in value, you get a loss on your tax return. If it goes up and you sell it, you have a gain. So you could sell it at a loss or use. It's just like stock. Think of it like stock. Okay, option two, Susie does mining. Oh. Now some of you know what mining is, but you set up a computer system that helps verify blockchain algorithms and you get compensated in Bitcoin or Ethereum or whatever the virtual currency is. It's a complex topic. You can read up on it. It's a very nerdy topic, but fascinating. When you do mining, you're essentially earning virtual currency that is ordinary income and it is subject to self employment tax. It is literally. Think of it, you're out there mining to find gold and when you get done with the project, you're getting compensated. And I'm just dumbing this down. I know some of you know far more about mining than me. But in the eyes of the IRS and accountants, if you get received virtual currency for mining that is ordinary income and is subject to se tax. Okay, I'm sorry everybody. I know some of you are going crazy. I'll go fast. This is so fascinating. Option B, you do this whole thing in your IRA or your Roth. So you can do IRA or Roth no tax. When you buy and sell your cryptocurrency, when you take it out of your traditional ira, you pay tax. When you take it out of your roth, no tax. I'm just dumbing this down, keeping it simple. And if you do the mining inside a retirement account, you have what's called ubit and we usually put a C Corp blocker in there and then we protect you and you only pay 21% in taxes. Okay, now this whole topic is a chapter in my partner's book. We have a podcast on it. Let me tell you guys where to go. Go to SD IRA Handbook. If you want to get the book on that. There's a whole chapter on cryptocurrency, and there's an article in the blog on crypto. And also if you get over to our podcast called Directed Ira Podcast. All right. Okay. We're going to get back to it now. Thanks, everybody, but I'm here for you. I'm loving this. I hope you guys are having a good time. All right.