There’s no doubt that crypto is one of the most exciting and fastest growing financial avenues available today. But with all of that growth comes changes to regulations and tax structures in both the United States and abroad.
Spritz Finance makes it easy to use your cryptocurrency in the real world by setting up bill payments that connect directly to your cryptocurrency wallet. We often get questions about how paying your bills with Spritz might affect you around tax season. Today we’re going to talk about the current tax rules around cryptocurrency and discuss a few ways that you may approach taxes with Spritz Finance. This isn’t financial or tax advice, and we advise you to work with an accountant to answer any legal questions about taxes.
Everyone knows regulations are in flux in both the United States and internationally regarding crypto taxes. Currently the IRS classifies cryptocurrency as a property, meaning it’s treated as an investment and not cash. Here’s what the IRS says about cryptocurrencies and how they relate to potential taxable events as of 2022:
Any of the following could trigger a capital gains or losses tax liability:
Capital gains taxes may apply when you sell an asset for more than you paid for it. Capital losses refers to when you sell an asset for less than you paid, meaning the amount you lost is a loss on your taxes. There are two types of capital gains: long term capital gains and short term capital gains.
Long term capital gains refers to the sale of assets that have been held for longer than 12 months, while short term capital gains refers to the sale of assets that have been held for less. Short term capital gains are higher, and are taxed as income while long-term capital gains are taxed as a long-term investment. The longer you hold an asset, the less you’ll pay in taxes when you sell it. The exact amounts you’ll pay varies.
Spritz Finance lets you control just how much you use to pay your bills with crypto, limiting how much you’ll be taxed to only what is necessary for you. To take advantage of long term capital gains, we recommend keeping track of how much cryptocurrency you convert into a qualifying Spritz stablecoin and how often. The best way to optimize this, and to make sure you’re doing it correctly, is to work with an accountant that has experience in cryptocurrency specifically. There are a lot of tax services out there that are specific to crypto, like zenledger, taxbit, or Koinly.
Cryptocurrency taxes may seem complicated, but saving on crypto taxes is really about exchanging as little as possible—something that Spritz enables. It’s time to make your crypto work smarter by using it to pay your bills and monthly expenses without fully unwinding your DeFi positions or off-ramping to a bank by using Spritz. There are several ways to save money on taxes by doing this, so we’ll walk you through all of them here.
HODL is the crypto credo, but sometimes it’s hard to do when you have bills to pay. The problem with paying your bills by exchanging large amounts of cryptocurrency to fiat currency and then transferring it to a bank is that each conversion triggers what is called a taxable event. However much you convert is how much you’ll be taxed on, so you could be paying more in taxes by converting crypto that you don’t need to use.
You could instead swap only what you need each time you need to pay a bill, but because you pay fees on each transaction, swapping smaller amounts more often isn’t a great solution either.
Spritz helps you avoid taking out too much in digital assets with our innovative crypto bill payment solution. Now, you can directly pay off your US based credit cards, loans, and other bills right from the Spritz app. Instead of converting your crypto into fiat currencies like USD and then transferring them to a bank to pay your bills, you can pay directly with cryptocurrency and only spend as much as you need.
Our Direct Wallet Pay feature lets all users with major crypto wallets make instant payments to thousands of US service providers. Use the Spritz app to arrange a direct payment with your wallet and only pay capital gains or losses taxes on the single transaction from crypto to fiat that is done through Spritz.
You love the potential for crypto, but converting it to fiat in order to use it can be time consuming and expensive when you have to pay gas fees on each transaction.
Using your cryptocurrency in the real world often means having to swap it in a decentralized exchange, send that cryptocurrency to a centralized exchange from your wallet, and either swap it again to a fiat currency or cash it out before sending it to your centralized bank. The process is complicated, expensive, and far from user-friendly. To make matters worse, because you’ve taken out more than you really needed to account for the complicated process and gas fees, you’ll have to pay more taxes on that additional fiat.
Spritz fixes that by handling everything. Using crypto to pay your bills has never been easier and more affordable by letting you transact only what you need. Spritz enables you to do only one transaction to both exchange your crypto to fiat and send it to be used to pay a bill all in one transaction.
One of the more obvious answers to the benefits of using your crypto for bill payments is that when you’re a little short on cash, it’s nice to have a way to break off a piece of your investment without having to liquidate everything.
Why pay bills late, incur late fees and other charges when you have your crypto sitting right there? Be nimble, while you figure out your next move. And if you use our platform, you can do this easily using Spritz.
Like we mentioned earlier, cashing out on an investment after holding it for less than a year may incur a short term capital gains tax, which is taxed as income in the United States. Consider your short term investments as a form of paying yourself for the investment work you’re doing, and minimize the transactions and associated taxable events by paying your bills directly with Spritz.
Okay, this isn’t really a tax tip, but say you’re getting paid in crypto. That’s great! Now that you’ve experienced the freedom of DeFi, and left behind all those banking, ATM, and other account fees, you probably don’t want to then have to go through the trouble of transferring your pay check to a centralized bank. Spritz helps you stay out of the traditional banking loop by letting you pay bills directly from your crypto wallet.
Avoid fees and stay true to the decentralized spirit.
Right now, you can join our beta and get access if you’re a U.S. resident.
The content above is for informational purposes only and is not meant to be taken as investment or tax advice. Any investment decisions should be made by the individual based on their financial needs and risk aversion. Please contact a broker or accountant for financial advice.