The 2018 federal tax reform yielded large corporate tax cuts. As a result, there are lots suggestions to taxpayers to reduce tax liability by incorporating and managing their financial assets through a corporation.
The new corporate tax rate is 21 percent for C Corps, which is much lower than the tax rates applied to high-income individuals. Taxpayers are left to determine whether their cryptocurrency activities fit into a corporation.
If you are mining or trading as a business, you may see some benefits from using a corporate structure. If you are actively trading through a corporate structure the reporting on your yearly activity will be greatly simplified.
A drawback for active traders considering a corporate structure is that they are limited to a smaller number of exchanges since to trade as a corporation you need an institutional account. Additionally, traders lose the long term capital gains rate on their trading activity which depending on their portfolio strategy can have a large impact.
You will also have the potentional deduction on Qualified Business. It is still unclear if this applies to cryptocurrency activities. You don’t hold gains in corporate strucutres so at the end of the year, you have to treat your inventory as if they were all sold. Unlike an individual where you only have to do this when you sell your crypto.
Camuso CPA is one of the pioneering CPA firms offering tax services for cryptocurrencies. Our services can help you get ahead of the game, and save you money where other firms may not have the knowledge to do so.
We will help you understand cryptocurrency. You should never pay more than you owe to the IRS. If you’ve bought or sold virtual currencies this year, consult with a trained professional to make sure you’re not exposing yourself to excess liability.
If you are interested to know more about how this might benefit your business and investment portfolio please don’t hesitate to give us a call or email today. One of our friendly and knowledgeable representatives will be happy to answer any questions you have.