Top 10 Crypto Tax Strategies of 2026 | Main Street Business Podcast | Mark J Kohler & Mat Sorensen

Every year, I know every one of you like me. If you believe in cryptocurrency, you're buying crypto every year. Buy your first seven thousand in your Roth IRA. If you have a 401k at work or in your small business, buy another twenty to thirty thousand dollars of crypto in your 401k and your S corp or small business. So just be patient with that strategy and it'll blow your mind. Welcome everybody to another episode of the Main Street. Business Podcast. My name is Mark Kohler. I'm here with Matt Sorensen, and it is crypto season again. Crypto's up 25% in the last 2 weeks, and we love tax strategies for cryptocurrency. We're both investors as well. So today's show, we're going to go through every tax strategy we can think of and that we've been recommending over the past 5 years to help you save taxes on your crypto investment.

Yeah, and what do we love more than making money in cryptocurrency? Keeping more of the gain and sending less to the IRS. Talk about winning twice. Let's make money on our cryptocurrency and actually keep as much of it as possible.

Yeah, well, crypto investors love paying taxes. They're big fans of the big government.

And oh yeah, how much can I send you? Just let me cut you in on this, you know, federal government.

All right, well, let's get to it. So I, Matt and I have decided we're going to go back and forth on concepts and then strategies. So let's get some concepts out on the table first. I'm going to just lay out a couple of them that I think we all need to know. To be on the same page, and Matt and I have held several national crypto tax summits, virtual crypto tax summits. We're both tax lawyers. Please trust us when we know what we're talking about. And if we could save taxes for you, we would freaking do it because we are investors ourselves. So first concept: crypto has no special tax rate, tax bracket, tax. code section. It doesn't. Now, they may have a special treatment with wash sales, but other than that, it's an asset. It's considered a personal asset that's going to have short-term or long-term capital gain. Concept number 1. What would you lead with, Matt, on concepts?

I think the first thing is what I call tax gain harvesting. I know people like to talk about tax loss harvesting. We can talk about that maybe for a second, but I'll talk about tax gain harvesting. And what I'm talking about here is Capital gains rate, a lot of people think is, well, the max rate's 20%. Yeah, that's the max rate, but that might not be what you're paying. In fact, that's what most people are not paying when they're making money on cryptocurrency. There is actually a 0% capital gain tax rate for long-term capital gains. If I own crypto for over a year, I can get a 0% capital gains rate if my income is under about $100 grand. This is after you take the standard deduction, so I can make $120 grand a year Take the $30,000 standard deduction, have $90,000 of taxable income, and I could be in a 0% tax bracket on my capital gains. So that means I could maybe, you know, for that $10,000 or so up to $100,000, if I made $1 million and, you know, that income is going to jump me into higher rates on capital gain. So I like that is like where you can sell crypto, take some gains off the table. Now let's say you're more middle or higher income earner here. Well, you don't actually hit the 20% rate until about $600,000 of married filing joint. You're only in the 15% rate. So maybe I can at least stay in that 15% rate before jumping up to the 20%. So just think about where you're at in the brackets on the long-term capital gains.

Yeah, and that concept I just shared a moment ago, wash sale, which we need to get on the table, means that you can sell that 2 Bitcoin or 1,000 XRP or whatever token or coin it is and turn around and rebuy it 5 minutes later. So get that gain at a lower tax bracket and then— or a loss, loss harvest, gain harvest— and then turn around and rebuy it. You cannot do that with your Tesla stock or any sort of marketable security. So that's a little exemption there. Now the next point I want to make when it comes to concepts here as we get over strategies is there's what's called short-term gains or ordinary income and long-term gains. So short-term gains could be buying crypto and holding it less than a year. That's short-term. You're going to pay whatever your bracket is, the same rate you have with your W-2 day job or your small business. You're going to pay that same rate if it's less than 12 months. If you hold it 12 months or more, Then you get in this capital gain bracket and some additional strategies, as, as Matt just explained. The last category would be income earned because you're materially participating. So think of staking or something that you're actively involved managing, managing the nodes, or you're doing some—

Mining.

Crypto mining. That might actually even be subject to self-employment tax, and you're not going to get capital gain treatment with that. And so if you're staking and you're making coins while you stake, that's income, whether you go take it, whether you go spend it or convert it to another token. So these are these different types of income. So when we talk strategies, you've got to say, okay, am I creating income with my active labor like crypto mining or a staking deal where you're pretty involved, or is it just buy and hold? And then we want to look at less than 12 months or more than 12 months. Those are going to put us in different lanes on the highway.

Yeah. And I think a lot of people, everybody comes at crypto differently. And there's obviously people who are doing all sorts of things in crypto, from mining to staking to they're buying and selling, they're holding stuff for the long term. And if you're in that bucket, you need to know all these different tax rules and strategies as you're making money and building wealth in cryptocurrency. But as you learn these different rules, you're going to find there's ways to engineer a better tax result. By still creating the same amount of wealth, but I don't want to overwhelm everyone. What I'll say is if you're someone making quite a bit of money here and you're doing lots of different things, you should have a tax lawyer that understands this. I mean, that's what our law firm KQS Lawyers does. If you're like Matt and Mark, I've just made some money on Bitcoin this year, or you know XRP or Solana, whatever crypto you're in. I sold some. Like don't don't get overwhelmed with this. All right, you know I don't want you to get overwhelmed with it. You're probably as Mark said, you're probably going to have short-term gain or long-term. gain. This goes on Schedule D on your 1040. But one of the things you can do is if you're trading and you've got short-term gains or losses—

Are you getting to a strategy? I got one more concept.

I got a strategy. Yeah, I'm trying to tie— I'm trying to say I got, I got, I got the best strategy still left.

Oh yeah, I know. We haven't even thrown down the strategy yet. We got to get these common terms. I love it.

Yeah. Well, here's the thing. And what's happened, crypto is volatile. But with that volatility comes opportunity. Mark talked about crypto tax loss harvesting here. I was talking about gains here. But let's say you bought Bitcoin at $90,000, it dropped to $60,000. Well, I can sell at $60,000 and lock in a $30,000 loss, even though I rebuy the crypto 1 minute later. I buy that same Bitcoin or whatever the cryptocurrency is 1 minute later because I believe it's actually going to go up in value. Well, what did I do? I created a $30,000 loss. If I just held that crypto and it came back to $90,000, I didn't get any loss. I just had this— it's caught back up, but I can't do anything with that loss. But because I sold when it was low and I locked in the loss, I can use it to offset other crypto gains. And if I had a short-term loss, it can offset short-term gains. A long-term loss over 12 months, it can offset long-term gains. So this is a unique strategy, that ability to lock in a loss but still rebuy that exact same cryptocurrency, frankly, minute one, I should say, right after you've sold it. And you cannot do that with stock. Like, the IRS was like, hey, stock investors, traders buying and selling stuff and trying to lock in losses and rebuying that same stock, creating a phantom loss here, like, we're not going to let you rebuy that. You got to wait 30 days. You got to sit out the market 30 days and then you can buy it back. Well, that rule doesn't apply to cryptocurrency. So, that's just that one. Think about that to lock in losses because when your tax return comes together, you're netting these gains that are taxable against the losses that can offset them.

I like that. And I've written down 5 strategies that I want to cover. And probably that list will grow, but I'm going to put that down as number 1. And that is really This making a smoothie type strategy. I want to take my gains and my losses, throw it in a blender, and get the best result on my 1040. Now you have to be very strategic. You have to worry about what brackets you're in, and this harvesting and being in the right bracket at the right time. And as you get to the end of the year, you've got to start projecting. You know, what am I going to bring home in my small business, my rental property, or my day job, or all combined? Am I married? Does my spouse have income? That's all going to play into it. That's why we're the busiest in the 4th quarter of the year, because we'll do a comprehensive tax consult and holy crap, we're going to save you 10 or 20 times what you pay us. That's what a tax lawyer should do. So keep that in mind. I'm going to call that number one. Now I have one more concept I want to make here, and I'm going to give you the bad news now.

Are we going to get into strategies yet?

Well, that was number one. I got to give them— I'm going to say this is not a strategy. But it's a concept you've got to know because I've got to give you some bad news. And then I've got 4 more here, at least myself. And that is trading crypto is not a business. Trading stock is not a business. The day trader status for stock is a very scary election that is difficult to get out of. You have to write the IRS to get out of it, and it doesn't always save you taxes, and that's for sure. And then trading crypto doesn't mean you can write off your home office or travel around to conferences as an expense for trading. Trading is not a business. And gosh darn it, I am sick and tired of hearing that if you set up an LLC, it now makes it a business. It doesn't. The LLC is for protection. And, and someone might be telling you a crypto LLC, and that's fine. They might put in the word crypto in the LLC, but It's the same at the end of the day. It's going to provide asset protection if we set it up in the right state. But don't—

Maybe privacy.

Yeah, you might get privacy and some more efficiency, mail forwarding, blah, blah, blah. But just don't think an LLC makes these other expenses a write-off. So unless you're doing crypto mining as a business and you've got, you know, 10, 20, 100 CPUs out in your garage, That's a business. Buying and selling online is not a business. So I hate to tell you that. The IRS is all over there, all over that, like white on rice. So be careful there. Okay, Matt, now with that said, I will let you go to the next strategy that you like and see what you think.

All right, my first strategy is using the same tax vehicles that have been in plain sight for what most people think of for stock, what we think of for real estate with self-directed IRAs, and that's using a crypto IRA. Roth IRA. That's where we're using a Roth IRA. This could be a health savings account, an education savings account, even a traditional IRA, but we love the Roth IRA. And that Roth IRA is going to buy cryptocurrency as an investment. You can sell it, you could trade it short-term, long-term, but that money's growing in the Roth IRA and coming out entirely tax-free at retirement. No tax drag, nothing going on your 1040. There's even asset protection benefits to having assets in a Roth IRA or other retirement account. But I'm building this wealth in this vehicle that we just all know. Everybody knows what a Roth IRA is. A lot of people have one. They're just investing and buying stocks, bonds, and mutual funds because that's what the Wall Street Roth IRA is. But you can use crypto as the investment asset. And so, we actually do that at our company, Directed IRA, where we Let your Roth IRA buy 60 to 70 different cryptocurrencies. Now, I know you could buy Bitcoin in a Roth IRA with Fidelity, but that's about it. But with us, you could buy XRP, Solana. There's 60 to 70 other different cryptocurrencies available as the investment asset that if you believe in and it's going to grow and be the asset that's going to create value and wealth, why not do it in a tax-efficient structure like the Roth IRA?

And I, and I love it, and, and I freaking do it myself. And everyone, I've made sure they have a crypto Roth. I even set up a crypto education savings account for my grandkids, and they own XRP in their college savings account. It's gross tax-free and comes out for college tax-free. But I know some of you are like, hold it, I've got $100 grand, I got $500 grand or more sitting over here in my Gemini wallet or whatever wallet and crypto.com and it's not in my Roth. You're saying I can just transfer it into my Roth? Yes, but only in little chunks. And guys, it's the snowball going down the hill every year. I know every one of you like me, if you're a crypto— if you believe in cryptocurrency, you're buying crypto every year. Buy your first $7,000 in your Roth IRA. If you have a 401 at work or in your small business, buy another $20,000 to $30,000 of crypto in your 401, in your S corp or small business. Then go back and stay in, you know, Crypto.com buying your crypto in your own name. Then next year you pass go, you do it again. Another $7,000, you do another $30,000. It grows, people. It just gets more and more snow. So just be patient with that strategy and it'll blow your mind. Yeah.

And I think kind of that $7,500 annual contribution, $8,600 if you're 50 or older, like that's how much you can put into a Roth IRA each year. So if you're someone brand new to this, and it's not like you're using your Roth IRA that's over in stock at TD Ameritrade, but you're like, well, let me just set up a new Roth IRA. We can do that. And like Mark said, he dropped that annual contribution in of $7,500. Like for any new crypto you're buying, it should go there. Like the government said, hey, there's an account you can open and invest with it and you don't have to pay us taxes like that. But there's a limit on how much you can do. Well, isn't that the first place everyone should start?

Yeah.

Throw the limit into it at least, and I'll start investing in that and the asset I believe is going to grow the most. And so, that's how we've been utilizing it. And we've been doing this since 2017, have had tremendous success with many clients, obviously, and crypto goes up and down. We're not trying to give investment advice. We're just saying if you have a perspective and you like crypto, have made money in it, and want to think about other strategies, have you considered the crypto Roth? Even the kids' Roth IRA that we've talked about, if your kids work in your small business or have a summer job and earn income, the health savings account Roth IRA. So many different options there. But just know there's a huge strategy there and opportunity. But we're not saying that's everything. Like Mark said, it's, it's, we're not saying drop everything there, but that $7,500 a year or the amount you want to set aside for that from your existing Roth dollars, let's take advantage of it.

Okay. It's millions, 10, 20 years from now with the rates of return that you're going to expect. And I know you cryptocurrency investors know that it's going to fly and it's going to be cyclical, but you will literally have millions tax-free by just doing that $7,500. And again, if you have a solo 401 or An old 401 from an old job. We can even, you know, really get some—

Mark's wearing his hat. Not a financial advisor, not investment advice. Yeah, yeah, yeah.

All right. Now I'm going to give you strategy number 3, and it's not too sexy, but we've alluded to it here, but it's critical. And that is hold all your crypto at least 12 months. Now, if it's in a Roth IRA, I don't care. Buy and sell all day long. But if you hold it personally, I've got to tell you, hold it at least 12 months because it's going to unlock a lot of other strategies when you can play with that capital gains bracket. If you're buying and selling crypto before you've held it 12 months, that's like a job and you're paying the highest tax rate. There's no real strategy there from a tax perspective. So it's got to be said, it's not sexy, but it's got to be on the table. And that is hold 12 months as long as much as you can. Once you hit the 12-month mark, then you can play this harvest gain strategy. Now, if you hold it less than 12 months and there's a loss in there, sell it, get the loss, rebuy it. I'm cool with that. But before you take a gain, try to hold it 12 months. All right. Yeah, not sexy, but got to get it out.

Yeah, I mean, I got another one that's not as sexy either. It's kind of more on the did you know side, which is NFTs. Now, NFTs have kind of fallen out of vogue, I think. I mean, you hear less and less of the hype on NFTs, though, although cryptocurrency in and of itself has, you know, grown significantly as an asset class. But NFTs are a collectible for tax purposes. It's important to know. So when you sell an NFT for gain, that is at a 28% max capital gains rate. Okay, that is not the 20%. You can bump up to that, which is similar to like selling precious metals or certain other collectibles personally. That can be your rate is the 28%. So just a note there. Not really a strategy as much as it is just keep that in mind for your NFTs. It's a little different.

All right, and I'm going to go for a big one that we love, and then I'll bounce back to some more mediocre ones. And it's the CRT, charitable remainder trust. We in particular like the variation called a CRUT, charitable remainder unitrust. Now we've been setting up over 100 of these in the last 4 or 5 years for crypto investors. We've been doing them for real estate investors for the last 15 years, but these CRUTs allow you to sell your crypto. You might have a million bucks, you might have $2 million, $10 million. You're one of those lucky folks that bought it back in 2016, you know.

Yeah.

But, um, if you've got a big crypto portfolio, you can start peeling out big sales and put them into a charitable trust. I'm just going to summarize it. We have separate videos on YouTube on this. I've got all sorts of 100,000-view videos on CRUTs, and you could do a consult with one of our lawyers. Yeah, and just within days here, just get on our website, what's down in the description. You can book a discovery call. But in general, what the CRUT allows you to do is sell the crypto tax-free. It all goes into a bucket, that $5 or $10 million or million dollars. You get the income from that for the rest of your life, and it's going to range— that rate of return, the payout will depend on your age. And your gender. Women live longer, guys. Hate to break it to you. Now, after you get that income set up, it is fully asset protected from a lawsuit, and then you can continue to trade your crypto inside that charitable trust tax-free, and you get a payout every quarter for the rest of your life, guaranteed for at least 20 years. So if you die, your family gets it. There's a charity involved after you're dead or, and/or your spouse. If you set it up with 2 lives to live, you could set up life insurance with it to pay out tax-free to your family. So many options. But the CRUT is a very powerful tool. And I'll just tell you now, if you've got a— if you've got less than $1 million in gains, I wouldn't worry about it. You got $1 million or more. This has got to be on the table. That's the break-even, in my opinion. You're going to spend around $8,000, $5,000 to $8,000 to get it set up. Maintain it every year for about $2,000. But the tax savings is off the chart and the other extra benefits. So that's the CRT. Love it.

Next strategy I want to hit is one that's been tried and true for all different asset classes, but also works for crypto, and that is getting a loan against your portfolio rather than selling the cryptocurrency. So real estate investors, very common. Of course, you own real estate, it goes up in value. Do you sell the property?

No.

You strip out the equity, you refinance it, or you take debt against the asset. And there's obviously a cost to the debt because you're going to have an interest back to the bank. But a couple of things have happened. One, I've obviously got a loan against the asset, which is not a gain. I didn't sell the asset, so there's no capital gain. But also, I still own the asset. So even though I've got a cost to the debt, I also still get the appreciation of the asset over time. So there's some, you know, you want to run the numbers on that and you obviously have to have your own perspective on where you think the growth is going to be on your cryptocurrency portfolio. But this is a strategy people use with their stock portfolios. Obviously, real estate investors are very familiar with it. And we're seeing more and more crypto investors and more and more lenders and institutions that lend against crypto portfolios. To help you access that wealth without having to sell the asset.

Love it. Great strategy. I wasn't even on my list. I'm excited. I've got two more. We might get to our top ten here. Okay, this will be now number seven. I'll read them all off here at the end. Number seven, opportunity zone. Now I'll tell all of you, this is coming in four months. It breaks loose in four months. Do not do an opportunity zone now in 2026. It was hot back when the Tax Cuts and Jobs Act was passed with Donald Trump the first round, and then it, it was built to expire because they had to pay for it and with other tax dollars. But then when the one big beautiful bill got passed, it ramped it back up and then to another level. What the opportunity zone says is when you have a capital gain You can take that gain. You don't even have to take all the proceeds, just the gain amount. So if you say, say you sold crypto for 200 grand, but your gain was 100 grand. So you bought it for 100, now it's 200 grand. So your gain's 100, but you got 200. See what I mean? Proceeds versus gain. That gain of 100 grand, you drop into an opportunity zone, you can defer the tax for a number of years, depends on when you sell. And that money goes into a real estate deal where the, the basis is increased by 10%. So you get immediate 10% basis savings on the taxable gain. And then if you hold that rental real estate for 10 years, you never pay tax again. And crypto guys, let me just say, diversifying your portfolio with a little bit of real estate ain't a bad thing. You're hedging, and I'm not saying sell all your freaking crypto and buy real estate. But if you're going to sell a portion of it and deploy it in some real estate, and these opportunity zones are generally areas across the country. There's two hundred twenty five hundred zones being identified by governors right now in 2026 to unleash on one one twenty seven. Those are zones where there's going to be a lot of redevelopment and building. And highly appreciated assets could occur. So you get to defer your gain, you get an increased basis, and you can exclude the gain entirely if you stay in the project. Plus you're diversifying your overall portfolio. Love the opportunity zone. Jam one.

Love that one. This is why I love doing the podcast with Mark J. Kohler, 'cause I'm always learning something new. I love that strategy. And I'd heard about it coming back, but I didn't know those details on it, which is cool. I mean, it's even better than it was before. It was a cool strategy last go around. We saw a lot of people selling businesses, other assets, real estate, and this is just another thing. Great opportunity for crypto. And I love the angle you have there on diversifying your asset portfolio too. So, well, I'll let you take the final one 'cause I'm kind of out of strategies right now.

I got 2 more. Rock and roll. Here you go, baby.

I didn't have any more. I was saying, what else you got? You keep shooting. We got the hot hand.

Earlier, but we got to say it. If you are crypto mining, trading NFTs, or building NFTs, like say you are creating NFTs, highly involved in staking, managing the nodes and all that, you are in a business. 2 words, S corporation. Is that 2 words? S, one, one letter?

It's one hyphenated word, but I— yeah.

You've got to have an S corporation. And I'm crypto mining right now. I think, you know, maybe I only have 8 or 10 CPUs between my wife and I, but we're making money every night in Bitcoin, every day, every hour. I'm making money. It's 24/7. It's the little things, people. So anyway, make sure you have an S corporation. to integrate. And if you already have an S corporation for maybe a small business you've got, just set up a subsidiary for your crypto mining. That's going to allow you to take write-offs now for all that crypto-related equipment, uh, home office, travel, dining, all the goodies. So I just wanted to get the S corp on the table as, as one strategy. Okay, love it. Number 9. And Matt, I want you thinking deep for number 10. You got to bring something.

I got something.

Bring something good. Number 9. I don't have a 10. So let's see. All right. Number 9, the lazy 1031. Now, if you Google this, you're going to see articles on it. I've done videos on this. It's called the lazy 1031. See, you can 1031 real estate, buy, sell a property, buy one of equal or greater value, no tax. It just kicks the game. Kicks into the new property. Can't do that with stock. Can't do that with crypto. But the lazy 1031 says, you know what I'm going to do? I'm going to sell that crypto, take that gain, and go create a write-off. I'm going to go buy an Airbnb. I'm going to go buy equipment leasing. I'm going to go buy more equipment for my business and bonus depreciate. Because see, in the one big beautiful bill, I can take 100% bonus depreciation on equipment. Now I got to materially participate in that, whatever that investment is going to be. But if I've got that $200,000 proceeds, $100,000 gain, freaking A, I could invest $100,000 of that into a piece of equipment and be leasing it out, buying some real estate, get bonus depreciation, throw in a little leverage there and get some rental income. Holy crap. I created a write-off more than $100,000. And so that's an offset. So it's an offsetting strategy. We call it lazy 1031. And again, you're diversifying your wealth. You're taking that gain, you're creating a bonus depreciation write-off, and you're creating new income. Don't go buy something stupid. Buy something that's going to generate income. Lazy 1031. I'm going to do a pen mark.

All right.

Love it.

Okay, well, I'm going to— I'm going to finish with one. And I started with this, but you didn't list it as a strategy, and I want to make sure everybody gets it. Because this is number one for me, which was getting a 0% capital gains rate or 15% instead of 20%. All right. I think a lot of people, a lot of crypto investors are in their 20s or 30s even. They're not there. They can still be— if you're married filing joint, you'll be making $120,000 and still get a 0% capital gains tax because after your standard deduction of $32,000, your taxable income is really only $88,000. You're in the 0% rate for the first $12,000 of crypto gains. So I think that's a lot of people who could still fall into that. And I know some people are like, well, Matt, I make $200,000, $300,000, $400,000 a year. This doesn't help me. Yeah, but you're still in the 15% rate. You're actually not at 20%. And knowing where those brackets break, if you've got a big windfall, or can even help you just chunk away at it. Again, you might be making $100,000 a year, married filing joint, and you're like, Well, I could sell $10,000, $20,000 this year, no tax, chunk away $10,000 or $20,000 next year.

Drop it in an IRA.

There you go. There we go. Because now we're building it tax-free no matter what your income is.

Yes, I love it. Okay. I like that, Matt. And I bifurcated number 1 and number 10, so I'm going to go through them. Number 1, harvest gains and losses strategically. Number 2, the crypto Roth IRA or Roth 401. Number 3, hold 12 months whenever you can. No-brainer. Number 4, be aware of the NFT tax. Number 5, charitable remainder trust. Number 6, borrowing or equity stripping against your crypto portfolio, tax-free income. Number seven, opportunity zone right around the corner. January first, two thousand and twenty-seven. Eight, using an S corporation if you're generating ordinary income from your crypto. Number nine, the lazy ten thirty-one offsetting the gain with bonus depreciation. And number ten, bracket selling. Make sure you're identifying your bracket before you sell. Bam!

I like it. That's the top ten. Baby David Letterman would be proud. You know, that was a top 10 list that didn't suck. So, and it's going to save you money. It's going to keep more money in your pocket as you're building wealth and growing it through cryptocurrency. So thank you, everybody, for tuning in. Hopefully you learned something on this. Remember, we do have a law firm. Mark and I are tax lawyers. I know you might see us on YouTube or listen to us on a podcast, but we do have a law firm helping clients every day across the country called KQS Lawyers. We also can do the crypto Roth IRA at our company, Directed IRA, as well. There'll be links in the description below. Let us know if we can be helpful to you, and we'll see you next week on the Main Street Business Podcast.

Happy investing.