I’ve learned a lot of lessons since I started experimenting with crypto 2 years ago. None of them have been more expensive than the tax lesson.
No matter what your politics are we can all agree taxes suck. Objectively it’s hard to understand how taking such a large percentage of one’s total income is really necessary.
On the news all you hear about is government misspending. This from a group that ran off fiscal responsibility when it comes to tax dollars.
We have our EPA Director Scott Pruitt’s 20-person 24 hour security team… making his employees fly Delta so he can rack up bonus miles… from a guy who was going to “gut” the department and massively reduce spending. The hypocrisy is amazing.
In the big picture I understand that the government needs our tax money to function and I accept that. But there’s something wrong with this current system.
For me personally, I wish there was something that took into account lifetime earnings – something that would be more compassionate towards new earners who are just starting their lives. Instead I’m thrown into the deep end (literally) of the tax bracket.
It just feels wrong that I end up paying a higher % of total income to the government than some of the richest people in our country.
But that was last year and what’s done is done. I’m learning from my mistakes – here’s what I’m doing differently in 2018.
Create LLC or S-Corp
By “investing” and trading cryptocurrencies I was essentially running my own business. That’s how I’m getting taxed on it, just instead of going through an actual business it’s being taxed as additional personal income.
By creating a company I have a better system for managing my business expenses and can reduce my future tax liability. I don’t know 100% how this works yet but I’m exploring it over the next few weeks.
Hold Everything For Over 1 Year
I learned the hard way about the difference between short-term and long-term capital gains. In 2017 almost all of my gains were “short-term”, meaning I held them for less than a year so they were taxed as “personal income” according to my personal income bracket.
If you hold for over a year, federal long-term capital gains kick in which are maxed out at 20%. For this reason – especially with my overall investment philosophy – I’m not going to touch anything until everything has sat for over a year. It’s just not worth the extra taxes.
Anyways, I’m going to be fine. I had enough money set aside to cover my tax liability. It was just tough to send so much of my USD savings straight to Uncle Sam. Maybe they can hire 4 public school teachers. Or better yet – build the wall… /s
(/s is internet slang for sarcasm. Figured my Mom would ask.)
ETH Recovery Continues
OK. This is good. This is very, very good.
Everything is happening pretty much as I expected. Recovery 2nd/3rd week of April. Check out this continuation pattern on the ETH/BTC ratio –
This is the opposite of bad. This is good.
Zooming out now on ETH’s chart –
Oh baby. This looks like a bottom to me. Even if ETH gets batted down to mid $400s again. I’m really confident in this recovery being real.
This is the 2nd inning with all this crypto stuff. ETH is about to go on a wild ride. The ERC-20 tokens I recommended are sharply recovering as well.
Anyways – everything is going great. Tomorrow we could have a crypto wide 20% reduction. That wouldn’t change anything in my mind. The overall trajectory is headed upwards. All-time-high’s for the REAL projects in the space will be broken this year. This is still the investment opportunity of our lifetimes.
If Uncle Sam loved me in 2017, he’s really going to love me in 2018 and 2019. I’ll just be paying him a smaller % of my gains.
Good News in ETH Ecosystem
- Golem launched on Ethereum mainnet (AirBnB for computers) – https://golem.network/
- Basic Attention Token announces big partnership with Dow Jones Media – https://www.cnet.com/news/ad-blocking-brave-browser-gets-dow-jones-subsidiary-as-partner/
- Vitalik Buterin proposes “Minimum Sharding Protocol” – a framework for a MVP version of Sharding (scaling Ethereum’s transaction per second capacity) – https://www.ethnews.com/buterin-proposes-minimal-sharding-protocol-for-immediate-development
Apologies for not updating earlier this week. It’s been a little surreal – the realities of tax season combined with my crypto predictions coming true. I’m back though. Onwards and upwards.