Using Crypto Loans to LEGALLY Avoid Taxes 💰
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- Опубликовано: 9 июл 2024
- Crypto loans allow you to take profits from cryptocurrency WITHOUT paying taxes, and they have tons of other benefits that make them a great tool for the crypto investor. Here's what you need to know!
00:00 - Intro
1:09 - Crypto-Backed Loans Explained
1:52 - Crypto Loans vs. Bank Loans
3:20 - Why Take Out Crypto Loans?
6:01 - How Much Can I Borrow? (LTV)
7:28 - My Experience (Celsius Network Loans)
8:58 - Step-by-Step Crypto Loan (Celsius Network)
10:12 - Best Platform for Crypto Loans
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One of the most fascinating opportunities with cryptocurrency is the ability to borrow money at practically no cost thanks to crypto-backed loans. Based on the numbers and my experience testing out this kind of product, I believe that a lot of people out there can benefit from this new form of lending, and I want to break it down further.
Crypto-backed loans are exactly what they sound like - they’re loans that you can take out against your crypto assets. When you take out one of these loans, you are using your crypto as collateral. In other words, you’re offering up your cryptocurrency to show that you’re good for the loan, locking it up with the lender in the process. When you pay off your loan, you’ll get your crypto back in full. But if you decide not to pay off the loan, the lender has the right to take your collateral to satisfy your debt.
Crypto loans don’t require any credit checks, whereas most traditional bank lending will require some form of a credit check. Similarly, crypto loans have near-instant approval, while traditional loans can take days or even weeks to be approved and processed. This means you can get access to the cash from a crypto loan within a few days, or perhaps even faster. Finally, crypto-backed loans often come with lower borrowing costs. Furthermore, traditional loans often come with all sorts of fees that you have to pay on top of your interest rates. Crypto loans, on the other hand, can enable people to borrow at lower interest rates and with little to no fees at all.
One of the most common reasons is the ability to cash out on your profits from crypto, without selling your assets. If your cryptocurrency portfolio has gone up in price significantly, you might be sitting on thousands of dollars in profit. However, if you sell that cryptocurrency in order to realize those profits, you’ll owe taxes on those returns. Taking out a crypto loan is not a taxable event, which means you can get access to substantial cash without paying anything to the government.
Another reason to use crypto-backed loans is as a replacement for an emergency fund. If you don’t like having large amounts of cash sitting around, it’s nice to have the option to take a loan out against your crypto in case of emergency.
The next reason is to add leverage to your portfolio. If the market goes up, you can earn much greater returns without having to invest more money out of pocket. However, if the market goes down, you could end up losing more money because you’ll have to pay back what you borrowed. I would not personally encourage leveraging a crypto portfolio, because the market is already volatile and it could easily backfire during a market crash.
The last reason is to do something called interest arbitrage. This is when you take out a loan at a low interest rate, then invest it in a higher-yielding asset to cover the interest payments and earn income on top of it. Although there are many ways to do this, in crypto, you are most likely going to do this with stablecoins or high-yielding defi platforms.
#cryptocurrency #cryptoloans #bitcoin
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This video is meant for informational purposes only, and is not a recommendation to buy or sell any security or cryptocurrency. It is also not a research report and should not serve as the basis for any investment decision. Additionally, I earn commissions for purchases and sign-ups made through the links above.
🌽 Try out Celsius Network and get $50 in Bitcoin w/ a $400 deposit - whether or not you take out a loan! celsiusnetwork.app.link/103086df5b (Referral code: 103086df5b)
Lol celsius
This is an amazing video! I was considering taking out a Celsius loan, might actually do it now hahah
Love the work and quality put into this video man!!!
Thank you! 🙌🏼
My great man, you just earned a subscribe! I'd been using Nexo for a good two tax seasons for crypto loans and now I'm opening up a Celsius account as we speak - using your link/referral of course. Thank you so much for breaking this down to the masses, can't wait to share this and taking a look at your other insightful videos. Much appreciated and wishing you much continued success!!
Thanks so much man, appreciate the love! 🙌🏼 wishing you lots of wealth on Celsius!!
I love this dude! I tried this, and almost took out a 5k loan, but I'm going to wait for now. Your channel is amazing bro, and I am binging all of your content. If I make a video on this, I'll give you credit, since you gave me a lot to think about.
Thanks my friend! There’s a lot to unpack with these - I’d be interested to see your take!
Thanks this video was very helpful for a Middle aged woman who is new to this stuff ❤️
Glad I could help! 😃
Great job Tyler
thank you!
Homie , you spit the realist talk I’ve ever heard about crypto/personal finance, I’ve been in the game since end of 2020. I’m a slow learner no wonder big boys hate the coin game
Thank you 🤣
Thank you! Will try Celsius.
Nice! Let me know if you have any questions, I’m happy to help!
This tactic is really cool and important to understand, it can be a way to delay taxes. But be careful. When the crypto is repossessed that's a taxable event equivalent to a sale. In some states the loan may be interpreted as equivalent to a sale if there was never an intention to pay back the loan and can become an expensive court battle. I imagine a future where lots of folks will be hunt down by the government for back-taxes related to this early crypto era. Furthermore, it seems like in the case of some stocks, you can take a loan against them, but it can be illegal to use that money to buy more stock. I won't be surprised if regulation of this kind reaches crypto assets in the future.
Is it ok if I take a loan via crypto and then converting to cash without worrying about the taxes anywhere in the world?
That means, if you have 50000 in btc, you get 5000 as loan. How much btc will be blocked? 50000 or 5000?
When borrowing USDC from defi like Aave, do you think there will be an issue with the bank/IRS after you convert say $20k USDC into USD and send to bank account? I used Nexo to borrow $20k USD and didn't have any issues because it was automatically recorded/logged as a "loan" when it was sent directly to my checking account so I assume that the centralized "authorities" saw that and didn't pounce on me. Whereas with defi....seems like there will be an issue when you manually have to convert USDC to USD and send to checking account from Coinbase...it wont automatically be recorded as a loan and seems like the "authorities" will flag it. What's your take?
I don’t think there should be an issue as long as you have the transaction records to show that you have locked up another asset as collateral. Of course, it’s hard to say this for sure because there is still not much clarity with crypto regulations. Unless you have a tax pro to help you through it, it could be a good idea to stick to those centralized platforms like Nexo, Celsius, etc. where you have clear records.
@@ValueForInvestors okay thanks for the reply
Great video. Thinking longer term as crypto rises and falls, using the 25% ltv from your example, as long as the ltv doesn’t go above 65% in case of a big dump you wouldn’t be margin called… is that right? Trying to piece together from the vid and Celsius website
Yeah, that margin call level will be higher with higher LTV ratios. For mine the margin call level was somewhere around $17,000 per BTC... which seems like a pretty unlikely level to fall to. But that's why I feel better at the 25% LTV, because margin calls are less likely.
If you're exploring the numbers, I would suggest creating a Celsius account and testing it out! It'll give you the margin call numbers front-and-center so you can weigh your options/risks.
Great video! After watching one of your previous videos on the topic, I took out my first Celsius loan today. Sadly, I have Texas rules to deal with, but still a minor inconvenience in an otherwise simple process.
Thanks Corey! Congrats on the loan, hope it was a smooth process. What are the “Texas rules” you have to deal with for this?
@@ValueForInvestors Long story short, Texas doesn't allow for loans or yields in stablecoins. So I had to get my loan paid out in USD to my bank account...which I will then, 3-5 days later turn it back into crypto. 🙄
I think New Jersey and Alabama have some similar rule.
@@coreys5629 That is a hassle, glad there's some sort of work-around though!
Thank you for this video. Won't you get taxed once you inevitably pay off the loan with the profits gained from your crypto?
Unless you sell your crypto, there will be no realized gains after paying back the loan.
@@ValueForInvestors I think your use of the term "realized gains" helped me to understand the situation better.
Here's what I understand the situation to be:
When you own crypto, you are not taxed while holding and the value of the crypto goes up or down according to the whims of the market. So if you pay off the principal of your crypto loan while that crypto is locked up as collateral, that's no different to the tax man than the value of your crypto increasing or decreasing.
You will be taxed when you cash out your crypto, but the tax you are charged will have nothing to do with the fact that you took out a crypto loan and paid it off - even if the payments were made with an increase in the value of your crypto portfolio.
Is all of that correct?
Quick question wouldn’t be the same since you need a taxed income to pay off the loan. So you end up paying the tax still?
I think the idea is you pay off the loan with whatever profit you might be able to make by staking your crypto. However, I wonder what will happen once the loan is inevitably paid off.
I tried setting up a Celsius account and it says I can't because the area I live. Is this not available in the US?
There are a few states it’s not allowed in - I forget which ones off the top of my head, but I think 2 or 3 states have laws against it. 🤔
I have a Celsius account but never got a loan. Can't wait till they create a debit card for a convenient off ramp👍 Thanks for the information✌
The Celsius credit card is going to change everything!!
@@ValueForInvestors Wow! Is there a waiting list for this already? This is bullish!✌
@@lyfted5555 I believe it's on the website!
@@ValueForInvestors I just got on the waiting list! Thanks✌
Celsius here I come thanks for this information.
You’re welcome! Celsius is the place to be. 💪🏼
great video. i have a question and i hope you can help.
say i bought a coin for $50 . it became $100. i get a loan against it. put 1 coin as colleterial and borrowed 0.5 coin(valued at $50) to top up the crypto credit card. later its time to pay back the loan .. the coin crashed to $50. now i just have to buy $25 worth of this coin (0.5 coin) to pay them back? + interest fees ?
so is this how i can short a coin without getting taxed? and actually use the profit ?
let me know if this makes sense.. thanks so much
is selling crypto asset to pay off loan taxable?
I'm not quite following - you will have to pay back the equivalent USD value to repay the loan. If the coin you use as collateral crashes, you may need to add more collateral to keep the loan in good standing. In your example, you'd still have to pay back the $50 you borrowed - even if the coin crashed.
And yes, selling crypto to pay back a loan is still taxable! But you may be able to deduct the interest payments from your taxes.
I like your video! :) Only thing I don't get is when you cashout and sell w/e the stablecoin used. In selling the coin to usd to transfer it to your bank account, is that not a taxed event? Still not following how you can completely avoid this tax if you want to spend the money you borrowed...
Thanks Tiffany! There are no gains when you trade stablecoins to USD.. $1 = $1. That means no gains to be taxed!
Do you recommend sending crypto to Celsius first before applying for the loan?
Yes, you have to have crypto in your account to use as collateral and apply for the loan. Plus, if you sign up with the link here (celsiusnetwork.app.link/103086df5b) you get a $50 Bitcoin bonus with a $400 deposit!
wait hold on, sooo... after they approve the loan & u receive the stable coins, how do u cash it out? how will it not be counted as realized capital gain, id need to send it to like Coinbase & sell it right? someone please explain to me!
Yes, you’d need to send it to Coinbase, Gemini, etc. & exchange for USD then withdrawal to your bank account. It is not realizing gains because you are not selling your assets, only exchanging stablecoins 1 to 1 (no gains)
@@ValueForInvestors wow omg, thanks for clearing up that with me. I ddnt expect u to respond so soon 😆 U just won me as a new Subcriber! Keep up the good work & more power to u 😃
Great video Tyler. Weird question: If you took out a loan against an existing stable coin collateral on Celsius, bought a crypto asset with the loan which went up in value and you paid off the loan, are there any advantages to doing this rather than using the stable coin you're borrowing against? Not sure if that even makes sense :)
Hey Jermaine! I think your asking whether to take a loan against stablecoins & invest it, or just invest the stablecoins?
I would personally just invest the stablecoins - you won’t earn interest on the loan collateral. Further, by taking out a loan, you can only get a maximum of 50% of the asset value, reducing your buying power. Yet, the risk of loss is still there. It seems like a lot of extra steps when I could just invest more into a crypto asset. 😃
Thanks for the reply. Using the same example, such as borrowing USDT against BTC is there any incentive borrowing USDT against USDC? Would the way in which you get taxed change?
Okay, do if I don't pay it back the only thing I will loose is my collateral? Will the company not let me get loans from them anymore?
You would lose your collateral.. but the collateral will be worth 2-4x more than your loan, so you’re better off paying it back 😂
@@ValueForInvestors I am gonna pay it back, just wondering if the only thing I'd loose is my collateral. And if I'd still be able to get a loan if i don't pay it. Again I am but just asking.
My situation: took 71000 loan, loan now at 78000 from interest. If I invested in crypto and made profit and pay back loan with profit what amount would I be responsible for taxes. Full amount of profit, profit minus original loan, profit minus original loan and interest.
Verify with a tax pro, but interest can sometimes be tax deductible - so you may only be responsible for taxes on (profit - original loan value - interest). But I think this varies, so again might wanna consult with someone who can tell you for sure!
Hey love your videos huge fan. You and I invest very alike and I love the way you come up with diff schemes. Here's a small issue with the point you raised in the video please let me know if I'm wrong.
Buy 20k in stable coins and take a loan out at 5k for 1 percent. You woulda got 6 percent originally from staking so by taking the loan you are forgoing the 6 percent or 1200 a year. Your new 5k loan at 25 percent ltv with 1 percent interest would have to be invested in something that will have to give you more than 1200 a year which on 5k you'd have to do a 25 percent return. mathematically you're better off staking. However where I think this could work is in 2 cases. You use your crypto assets to collateralize a 1 percent emergency fund and never stay in cash ever again orrrrr save it for when the snp crashes and buy buy buy.
Thanks for the comment! You make great points about borrowing against stablecoins to invest. It’s very tricky to come out on top.
I really don’t see much point to borrowing against stablecoins for the points you mentioned, more so BTC/ETH and other cryptos. But then, like you say, it needs to be a great investment to make up for lost interest & loan interest costs! I really see it most convenient as an emergency fund, or for taking profits without taxes and paying it off over time (or to avoid short term capital gains at the very least).
Question, so let's say I take a 2k stable coin loan out, I buy crypto with it. That crypto goes up double, so I have 4k now. I trade back to the stable coin and pay the loan off, I'm left with 2k, do I pay taxes on the 2k?
Yes, you would have 2k of capital gains in this situation, so you would owe taxes on that 2k of profit.
How do you avoid the tax when you have to pay back the principal? Transferring USD to stable coin (to pay it back) is a taxable event?
There are no capital gains when buying stablecoins. $1 = $1, so you won’t be taxed on anything there.
@@ValueForInvestors - but if I needed to use my BTC (in collateral) which hopefully appreciated, maybe not, how do I use my BTC in collateral to pay the loan back while avoiding CGT?
@@bricar0724 You can't use your Bitcoin in collateral - it's locked up. So you can only release it by paying off the loan, but the collateral can't be used for paying off the loan. If you could, it would be considered as realizing gains, and would therefore still be subject to capital gains tax!
@@ValueForInvestors - is there a way to pay off the principal, other then paying it off with your already owned USD/Stable coin?
Well, I am French, I live in France, we would like to do the same thing as you guys with those crypto loans and avoid paying taxes by paying back the loans with cryptos only. Crypto to crypto trades ARE NOT taxable events in France. But, we still don't know how the tax administration will consider the crypto loans ;
Some claim that they could consider that it's a taxable event when you take out a loan with your crypto as a collateral because the exchange locks down your coins and has the right to sell them in case you get liquidated. Therefore ; they could say ' ah you see, you used your crypto, you exchanged them ' against payment ' ... But of course all of that is speculation ...
At the end of the day, the tax administration can do whatever it wants to do since they are like a mafia. I wish to all of you good luck and I hope they'll leave us alone (and you too :P )
We can only hope they’ll leave us all alone 😂🤞🏼 non-taxable crypto to crypto trades sounds like a good deal though!
@@ValueForInvestors Yes it really is, and when it comes to futures contracts, we have no idea how it goes for them since there is no regulation about, moreover, when you win trades in the inverse perpetual contracts, you get BTC ... so, as long as there is no FIAT involved, no taxation ... normally at least ... (in France). But it's always vague ... things can change ... I hope they won't come with some stupid ' retro active law ' about it XD
In any case, I think the crypto loans are really an extremely positive things for hundreds of millions of people in Europe and in the USA and for billions of people in the whole world. A good stuff really ... :P
I'm like you and live in France. I am waiting to make enough money then move across the border to Switzerland where crypto gains are not taxed. I refuse to pay any capital gains to the French government. In the meantime i have been using this loan system and not declaring a penny to them.
So you put your crypto up for collateral, get stable coins as the loan and then can sell those stable coins and deposit it into your bank? And if the IRS notices the large deposit and comes after you you can simply prove it was a loan and it’s a non taxable event?
You've got it!
@@ValueForInvestors last question, let’s say I want 100k loan and put 200k up for collateral or whatever it might be. If it drops below the needed collateral point do they take only what’s needed to cover the loan amount or do they take all of my collateral?
I think it depends on the platform - most will only liquidate what is needed to satisfy your minimum collateral. Others charge fees on top of liquidating you... which is why I always stick to Celsius with loans.
❤️❤️❤️❤️👍👍👍👍
Do you get taxed when you use your crypto to pay off the loan?
If you sell crypto to pay the loan, yes - but if you just pay off the loan with USD (or stablecoins that you purchased with USD), no taxes. The collateral will be returned back to you and no taxes are owed.
@@ValueForInvestors so using stable coins to pay off my loan is tax free! Woah. Thanks a lot for the info. I just used your referral code also!
@@Padda26 thanks so much!
Can u do more specific, I'm broke but let's say 1 million ,what are the percentages monthly yearly,?
Hey Daniel, I'm not sure what your question is. 🤔 Do you mean the rates on a $1 million loan?
@@ValueForInvestors yes,how would it work?
@@danielbrian8019 You would need between $2 million and $4 million to take out the loan... but you'd get $1 million in cash, then owe that 1% APY rate on the value of the loan.
Hey Tyler new to crypto..If I sell my crypto , I would have tax to pay on it,,, but if I take a loan out and don't pay it back, they sell my collateral and return me any remaining amount
Yes, but I would recommend not "not paying it back" 😂 that situation is known as a liquidation, and when that happens, it's still considered selling & you would owe taxes on it.
@@ValueForInvestors haha thank you! I get it now, great content you put out mate!
Take this video down and make an updated version!
Celsius.... This didnt age well 😂😂
Celsius lol
Do you have a Patreon channel?
Nope, is there something you’d be looking for in a Patreon page from me? I’ve considered starting one, but not sure what I’d do with it.
@@ValueForInvestors I'm looking for detailed instructions navigating Gemini and Celsius... I've contacted them, to no avail. Maybe buy a 1 hour tutoring class.
I'm on the older side, getting kinda slow... The user interface and terminology aren't what I'm a custom to.
I've struggled to get things rolling for weeks and weeks.
You do an excellent job at what you do. You're very good at explaining things, well spoken and professional.
Thanks so much for the info! The closest resource I have is probably this video, but it may not be as detailed as you need: ruclips.net/video/e15xvc0qkt8/видео.html
I’ll keep this in mind moving forward and perhaps I’ll put a tutorial together for both!
Celsius is gone
I think you have to pay taxes on your gains when the crypto is taken to cover the loan which it backed. So, it's simply a lie that this avoids paying taxes!
I think you need to do more research. The only time that a crypto loan would become a taxable event is if you sold/liquidated crypto to pay back the loan.
@@ValueForInvestors Exactly, and this is what eventually happens!
@@dmitry926 If you pay back over time in USD you'll never be taxed...
@@ValueForInvestors You will be taxed when you sell your crypto if it remains yours. There is no tax evasion here even for a cent!
@@dmitry926 I think they way it works is that unlike selling your coin. Pulling a loan out is not considered cable gains cause you still own your asset. Now maybe if you decide not to pay the loan back at all then what ever platform you used will keep your assets therefor it is acknowledged as “capital gains” since you lost your assets to obtain X amount of USD
coinbase charges 8% interest
That's why you gotta get on Celsius instead! 1% interest on loans 🔥
lol did not age well
why?
Celcuis tanked along with others…a lot happened lol. If you’re new to crypto watch dollar cost crypto.