Paying for College With Crypto? 3 Tax Tips – TheStreet

Paying for College With Crypto? 3 Tax Tips – TheStreet

Blockchain Crypto Market Technology
July 22, 2022 by Coinvasity
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Retirement Daily's Robert Powell caught up with Jeffrey Levine, CPA and tax pro from Buckingham Strategic Wealth Partners, to discuss tax tips for those attempting to pay for their college education with cryptocurrency.TurboTax Live experts look out for you. Expert help your way: get help as you go, or hand your taxes off. You can
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Retirement Daily's Robert Powell caught up with Jeffrey Levine, CPA and tax pro from Buckingham Strategic Wealth Partners, to discuss tax tips for those attempting to pay for their college education with cryptocurrency.
TurboTax Live experts look out for you. Expert help your way: get help as you go, or hand your taxes off. You can talk live to tax experts online for unlimited answers and advice OR, have a dedicated tax expert do your taxes for you, so you can be confident in your tax return. Enjoy up to an additional $20 off when you get started with TurboTax Live.
Recommended Read: 4 Crypto Tax Myths You Need to Know
Recommended Read: Your Cryptocurrency Tax Guide
Robert Powell: You have designs on paying for college with crypto? Well, here to talk with us about this is Jeffrey Levine from Buckingham Wealth Partners. Jeffrey, what sort of tax tips do you have for us on this one? 
Jeffrey Levine: Well, I think it's really important to understand what your college will accept. And a lot of colleges probably won't accept crypto. So there is this first step, of course, of converting your cryptocurrency into cash or something else that's going to be accepted by the college. And to that extent, if you do sell the crypto or use it to pay for something because using crypto to pay for something is effectively treated as a sale here, that would be a capital event, right? Could it be a gain if you've got crypto for a long period of time? It could be. It could be a scenario where if you bought crypto more recently, maybe it's at a loss. Though, I assume if you're looking to use it to pay for college, it's probably something you've had for a long time and were able to enjoy some of the rides up. Even though crypto is much lower today than it was in the recent past, it's still a lot lower than it was, let's say five or six years ago. And so the capital gain would be important. 
The other thing you could think about is if you've got a long runway still left for college, maybe you could realize some of those cryptocurrency gains now and put the proceeds into, let's say, a 529 plan. That would at least stop the bleeding, so to speak, in terms of your taxable capital gain, and make the future growth on those dollars after it's contributed to the 529 plan tax-free if used for qualified education purposes. 
Robert Powell: All right. And of course, if you bought the crypto at its peak, you'd have to sell it now at a loss, perhaps, and you might be able to at least capture some of that capital loss. 
Jeffrey Levine: You could capture that capital loss. Now, it's important to realize that capital loss only offsets other capital gains and then up to $3,000 of your other income. So if you made, let's say, $50,000 of earnings this year, you can't wipe out your $50,000 of earnings with $50,000 of cryptocurrency losses. But if you have other stocks, bonds, etc., that have increased in value over the years and you sell those with a gain, you can offset an equal amount of gain with whatever loss you have.
Editor's Note: The content was reviewed for tax accuracy by a TurboTax CPA expert.
Zach Faulds contributed to the writing of this article and produced the video and/or the graphics associated with it.

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