While some countries out there remain tax-free havens for crypto users, many governments are starting to see there is a profitable side to this emerging asset. As a result, new laws are passed each year, aiming to tax your hard-earned crypto income. But do not lose hope just yet. Some clever people out there found a unique loophole to pay less tax. It all starts with crypto-backed loan platforms.
USING A CRYPTO BACKED LOAN: HOW TO PAY LESS CRYPTO TAX
A few different government organizations (for example, the IRS) treat cryptocurrency as property. So, many people are trying out crypto-backed lending platforms to pay less tax on crypto-to-crypto transactions. So, for this example, pretend we have a friend named George. George just bought $5,000 worth of BTC, which he has been holding for 10 months. However, he really likes what he is seeing in the Ethereum community. Someone told him the price might go up, and George wants to capitalize on this.
HOW TO BUY MORE CRYPTO WITH A FIAT LOAN
George has plenty of BTC but he is a little short on cash. So, George goes to a crypto-backed lending platform, which offers him a fiat loan in exchange for his crypto. With his BTC stored safely as collateral, George walks away with his cash and heads to the nearest crypto exchange. There, he buys his share of ETH on the market. A few months later, George repays his loan and gets his BTC back. Not only did George acquire the ETH he wanted, but he was able to circumnavigate any crypto-to-crypto tax implications in the process.
THE RISKY SIDE OF THE PLAN
While this plan looks incredibly attractive from some angles, if you dig deeper, it is not all dollar signs. If the market happens to take a nose dive, then our friend George will be under some financial pressure. On the plus side, though, if the market goes for a bull run, you can pay less tax and profit in the process. Either way, it is essential that you research and find out the best crypto-backed lending platform. YouHodler is one of the more popular ones on the market with the best loan-to-value ratio (80%) and near-instant loan approvals. In this ever-growing industry, one must get creative, and this is certainly one way to do it.