The income from whatever source – mining, investment or acceptance as payment – still must be reported, and lest you not think this is serious, let us not forget who is issuing the warnings: if you have been ‘tipping’ economists, you’d better think about them now.

Gains on crypto are taxed, just like gains on stock you might own. Here are some ways you can pay less tax.

Use a Tax-Loss Harvesting Strategy

The IRS allows investments to cancel out capital gains taxes by selling an investment that went down after realising a capital gain somewhere else. This is called tax-loss harvesting. It can be done using any security that is tradable, including stocks and bonds, but also exchange-traded funds (ETFs) and crypto – although your IRA or 401(k) does not enable the strategy (since you do not get an opportunity to harvest losses to offset gains). Since the strategy involved in tax-loss harvesting is naturally risky, it’s helpful to partner with an experienced financial planner, ideally one who has experience with crypto trading and tax-loss harvesting. Your advisor can help ease the process of comparing transaction costs with any potential benefit that a timely tax-loss harvesting strategy can deliver to your tax bill – it might mean an extra few hundred dollars in your pocket come next year, one way or the other. A few helpful hints that might make the process more manageable:

Sell for a Loss

If you’re ready to begin investing in tech start-ups or real estate, your tax refund can help to get the ball rolling. Before purchasing any large item, research your options and consider speaking with a professional. You also typically report capital gain or loss on your tax return when you sell for more than your cost basis any investments that you own, whether you hold the digital currencies in an exchange wallet or an overall wallet. Even if you sell it for another digital currency on crypto-to-crypto trading platforms or use it as currency for goods and services, the IRS still wants its cut. Right now, unlike stocks, bonds, mutual funds, or ETFs, cryptocurrency isn’t subject to IRS wash-sale regulations, allowing you to take advantage of this loophole by selling coins at a loss and immediately buying back.

Carry Forward Your Losses

You can also, of course, reduce taxes by selling short-term losers on a bad market day, as short-term capital gains are taxed at much higher rates than long-term capital gains in the US. For example, Brian could have sold some crypto for a loss, but has already used this loss against capital gains that he realised last year – that loss can offset up to $3,000 of other income. The rise and fall of a cryptocurrency in Brian’s portfolio resulted in him losing cryptocurrency: this is a loss from an act of selling, so it is not deductible because it happened in the course of a profit-making activity. At the same time every year, look over your list of previous year. If you have been keeping good records during the year, then this task will be much easier, and you’ll be more likely to take the deductions. Many brokers and exchanges will keep records of everything you do for you.

Sell for a Gain

You’re required to pay taxes on sales of cryptocurrency just like any other investment in stocks or anything else. Profits count as owing capital gains tax, while losses can offset it. Tax-loss harvesting allows you to reduce a capital gain by selling a cryptoasset at a profit – you then buy back the same cryptoasset at, say, half the price from another wallet you own and realise the capital gain later, reducing the current tax liability. Hodlers can reduce taxes by holding for more than one year (forming the basis of a tax liability for long-term capital gains, which may be less than short-term capital gains), as well as by gifting it to a family member. Es is the key, moreover, to calculating your cost basis for all cryptocurrency trades, which can be a painstaking process, as you’ll have to track purchase information from multiple exchanges and wallets, but there are software products that can help by pulling together the transaction record from all sources and allowed to create one database back-end that computes the cost bases for your crypto positions as you sell them off.