Cryptocurrency tax

Uuuuu1111

Is their any way to avoid paying tax on profits from cryptocurrency?

Elessar

in Ireland? No.

You could leave the country, become resident in another low or no tax country for at least 3 years and then cash out. But that's about it.

d791

Cryptocurrency falls under Capital Gain tax, hence no need to wait for 3 years to cash out.

Grumpypants

Hodl and you never have to pay tax !

GooglePlus

https://www.boards.ie/discussion/comment/117744435#Comment_117744435

Is this definitely true?

I thought that you had to pay the 33% anyway after 8 years, even if you don't cash out.

AlmightyCushion

https://www.boards.ie/discussion/comment/117796578#Comment_117796578

That is for ETFs (probably other types of funds as well but ETFs are the most popular ones that fall under that).

mdmix

In terms of avoidance, is using a crypto debit card for purchases a potential way to do this. I understand spending is still a taxable event, so you cannot avoid paying tax on the gains. But if my average bitcoin purchase price is 20k, and I were to start to buy 2k bitcoin a month at market prices (49k) into a crypto debit card.. This surely raises my average purchase cost and thus reduces my tax liability?

Pawinho

https://www.boards.ie/discussion/comment/117743103#Comment_117743103

"If you have been tax resident in Ireland for three consecutive tax years, you become ordinarily resident from the beginning of the fourth tax year.

If you leave Ireland after this time, you continue to be ordinarily resident for three consecutive tax years. For these three years you must pay Irish tax on your worldwide income except for:

• income from a trade or profession, no part of which is performed in Ireland
• income from an office or employment, where all the duties are performed outside Ireland
• other foreign income, for example, investment income, if it is €3,810 or less. If it is more than €3,810, the full amount is taxable."

LawBoy2018

https://www.boards.ie/discussion/comment/117798480#Comment_117798480

Nope - It works on a first in, first out basis

The Undecided One

Would using DeFi projects and obtaining loans not allow you to avoid paying CGT?

You are not selling your asset, you are locking it up into a smart contract and borrowing money against it, this seems like what the "world elite" are doing with their money. You do have to provide more money than you are borrowing but the rates are supposed to be very low (as low as 0%) and you keep your crypto.

I'm only staring to look into this as my portfolio is too small to borrow against but the plan is t DCA for the next couple of years anyway.

Maybe someone has more info on this?

madmoe

https://www.boards.ie/discussion/comment/118071123#Comment_118071123

This is interesting and I would like to hear others opinions on same.

antimatterx

How are people treating staking rewards for tax purposes? Are you just paying income tax on the value of the coin when you receive it?

Do you pay as you get paid? Or in one lump sum?

massdebater

https://www.boards.ie/discussion/comment/118071123#Comment_118071123

Yes, this is pretty easy to set up and can be handy for avoiding tax. Plenty of cefi and defi options for borrowing cash using your crypto as collateral, as well as traditional places like Interactive Brokers if you want to borrow cash using your regular shares as collateral. Most places allow you to keep the loan forever, providing you keep within their LTV thresholds. Did you have specific questions about it?

Atlas_IRL

Coingbase have started to send much more intrusive KYc to US and UK customers.

FastFullBack

https://www.boards.ie/discussion/comment/118071123#Comment_118071123

How exactly does this legally help avoid paying tax?

FastFullBack

https://www.boards.ie/discussion/comment/118444506#Comment_118444506

I'm looking for the answer to this as well.

In terms of paying income tax I believe that is a once a year activity. For example I have to pay income tax for 2021 before October 2022.

It's the calculation of income tax on staking I am trying to figure out. Some staking protocols pay rewards every day or even less, so do we have to work the € of each and every rewards based on the € price of the reward token at the time you got the reward. That is obviously not workable if you're receiving daily reward.

Or do we work out the rewards € value once a month?

Also what happens if the token value drops before you pay income tax? e.g. Let's say I earn 10 tokens @ €10 each in December 2021, so total I earn €100. If I then want to declare and pay income tax in February 2022, but the token drops to €1, so my December income is now only €10. What income tax do I declare and pay?

Going to read the big tax thread now and see what I can figure out.

The Undecided One

https://www.boards.ie/discussion/comment/118468885#Comment_118468885

The idea is that if you don’t sell your crypto or any other asset there is no taxable event and no tax due.

There is of course the risk of your asset loosing value and falling below the LTV ratio required by the lender, in which case your asset would be sold to pay off the loan in full.

FastFullBack

https://www.boards.ie/discussion/comment/118469777#Comment_118469777

Right but if we all simply hold our crypto forever there is no taxable event 😀. So what's the difference?

massdebater

https://www.boards.ie/discussion/comment/118470619#Comment_118470619

That's pretty much what the wealthy do! Having a never-sell strategy allows you to keep taking loans and you never have to pay then back, once you keep it below the LTV threshold. If your assets drop in value they will get sold off, but only enough to bring your LTV back to it's target %. You can also add extra cash to prevent a liquidation if it looks like it's getting close.

FastFullBack

https://www.boards.ie/discussion/comment/118476266#Comment_118476266

Right but how would this work.

Let's say I want to use my crypto earnings to fund a deposit on a house.

Typically option: Sell the crypto to € and pay CGT

This option: Keep my crypto, use it as collateral to take out a Defi loan. Take the Defi loan funds, convert to € and use those funds for house deposit?

And because I haven't sold any of my crypto that made a profit, I am not liable to pay any CGT on the funds I use from the Defi loan because they did not have any gain?

massdebater

https://www.boards.ie/discussion/comment/118477438#Comment_118477438

Yes, this is correct! With your second option, the only taxable event would be if your assets got liquidated but, if your assets increase in value (or you pay off the loan), this will never happen.

FastFullBack

https://www.boards.ie/discussion/comment/118480495#Comment_118480495

This is very very interesting.

Is there anyone actively doing this with Defi loans?

massdebater

I've only done it for smaller defi loans to see how it works, but I'm planning to do it through IB for a house deposit using my shares as collateral, as they're a bit less volatile.

Your main risk is some of your collateral getting liquidated but, even if that happens, you still get to keep your loan money.