Ryan is a 24-year-old single student who only works part-time during summer. His total annual income is around $20,000.
In late 2020, a friend of Ryan’s told him about DOGE so Ryan decided to invest money into it. On November 12, 2020, Ryan purchased 60,000 DOGE for about $166. After seeing a slight price increase, he bought an additional 60,000 DOGE on December 12 for around $185.
Ryan still HODLs all of his DOGE on November 5, 2021 despite being tempted to sell during the May 2021 peak. After doing some research, he decides to sell all of his 120,000 DOGE and invest in new coins. He sells at $0.26 – significantly higher than the initial purchase price.
After importing his transactions into our system, Ryan notices that he has made $31,158 in short-term gains. He takes the ACCOINTING.com generated report and enters his gains into his tax software tool of choice only to find out that he now owes $4,436 in taxes to the IRS.
But what if Ryan had used the Accointing Tax Optimizer?
He could have gone to the Tax Optimizer tool and dragged the slider to see that his short-term gains would have turned into long-term ones if he had waited just a little longer.
Seeing this, he would have probably noticed that his tax report looked different if he had just waited till December 13, 2021, (assuming that the price of DOGE remains constant). While Ryan would have realized the same gains of $31,158, his total tax is now only $748!
Ryan would have enjoyed the same gains but saved $3,688 ($4,436 – $748). Because of Ryan’s low income, despite his capital gains, he is taxed at 0% on his long-term gains, but any short-term ones will still be taxed at his ordinary income rate of 12%.
On December 13, 2021, Ryan could have sold his DOGE and invested in a new, more lucrative coin without the previous tax burden.