Open Ledger has released a new guide on avoiding tax fines on MetaMask transactions.
The company’s latest guide talks about harnessing a legal strategy called tax-loss harvesting to optimize taxes. This strategy is helpful for investors whose portfolios have taken a hit in the current bear market.
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Open Ledger’s most recent guide coincides with a Forbes Magazine article that talks about how investors can recover some of their losses during a slump in the market by utilizing tax loss harvesting.
According to the report, this is a tax code that is used to compensate capital gains against capital losses. This means if an investor’s losses have overtaken their gains this year, they can receive up to $3000 against their non-trading income as a tax deduction. However, investors will have to carry their losses forward on their tax returns and offset them with future capital gains.
Open Ledger explains that this is a helpful deduction that minimizes the effect that the bear market has on cryptocurrency. There are some requirements, though, including actually selling the cryptocurrency the investor currently has. Their crypto must also be held in a taxable investment account.
These requirements are not attainable for many investors, so Open Ledger recommends getting Non-Fungible Tokens (NFTs) instead. Virtual assets can also be used for tax loss harvesting, and they can be used just like stocks – investors can trade them and make a profit. However, NFTs have special characteristics that make them a better option than stocks and bonds.
The NFT market is volatile, and while some investors with lower risk appetites will see that as a disadvantage, investors who want to maximize tax savings can use this volatility to make a profit. Open Ledger says this requires a lot of research on the part of the investor, like knowing the original value of the currency and comparing it to the current prices, and traders must be prepared to do their homework.
“Tax loss harvesting is a very common and legal strategy in the world of stocks and securities. The how-to guide explains what tax loss harvesting is and why virtual non-fungible tokens are unusually effective for taking advantage of tax breaks,” a company representative said.
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