Leverage the 0% Capital Gains Bracket as Bitcoin Prices Surge

The price of Bitcoin is on the rise, and with it comes the potential for higher taxes for crypto investors. However, if you find yourself in the 0% capital gains bracket, there’s a lesser-known strategy that can help you save on future taxes.

What is Tax-Gain Harvesting?

The strategy, known as tax-gain harvesting, involves selling profitable crypto during a lower-income year. By doing so, you can take advantage of the 0% long-term capital gains rate, meaning you won’t owe taxes on your gains as long as your income remains below a certain threshold. This bracket applies to assets owned for more than one year.

“That’s a very effective strategy if you’re in that bracket,” says Andrew Gordon, a tax attorney and CPA.

Income Limits for 2024

The income limits for qualifying for the 0% capital gains rate may be higher than you think. For 2024, single filers can qualify with a taxable income of $47,025 or less, while married couples filing jointly can qualify with an income of $94,050 or less. These limits are set to increase for 2025.

To calculate your taxable income, subtract the greater of the standard or itemized deductions from your adjusted gross income. This includes any profits from crypto sales.

Example:

If a married couple earns $125,000 in 2024, their taxable income could drop below $94,050 after subtracting the $29,200 standard deduction.

Resetting Your Basis

You can also utilize the 0% capital gains bracket to reset your “basis,” or the original purchase price of your crypto. By selling profitable crypto in this bracket, you can harvest gains without incurring taxes, then repurchase the same asset to maintain your exposure.

Experts advise running a tax projection to understand how increased income might affect your situation, particularly concerning phaseouts for tax breaks.

Current Market Trends

As of November 18, the price of Bitcoin was hovering around $90,000, up over 100% year-to-date, and briefly hit a record of $93,000 during a post-election rally. While predicting future price movements can be challenging, some investors are optimistic about potential boosts under President-elect Donald Trump, who has indicated pro-crypto policies.