Can you write off stolen crypto?

Sometimes. In the United States, a stolen crypto tax write off depends mainly on why you held the crypto. If it was an investment, a theft loss may be deductible under section 165 of the tax code. If the money was sent for personal reasons, the deduction is generally blocked, as of October 2026.

Can you deduct stolen crypto?

Section 165 of the Internal Revenue Code allows a deduction for losses not covered by insurance or other compensation. For individuals it lists three kinds: losses in a trade or business, losses in a transaction entered into for profit, and personal losses from casualty or theft.

The third kind is tightly limited. Under section 165(h)(5), a personal casualty loss in tax years beginning after December 31, 2017 is deductible only to the extent it is attributable to a federally declared disaster or, under the current text, a state-declared disaster. That limit was due to end after 2025, but the One Big Beautiful Bill Act removed the end date. The IRS says the deduction was made permanent and, from 2026, also covers state-declared disasters.

Is a crypto scam tax deduction allowed by the IRS?

In some cases. In Chief Counsel Advice 202511015, dated January 17, 2025 and released March 14, 2025, the IRS chief counsel's office looked at five scam victims and found that all suffered a theft under state law. Whether they could deduct it turned on profit motive.

• Deductible. A victim of a pig-butchering crypto investment scam, a victim of a fake bank fraud specialist who moved funds to reinvest them, and a phishing victim whose investments were taken without permission.
• Not deductible. A romance scam victim who sent money for a fake relative's medical bills, and a victim of a fake kidnapping call. Their losses were personal.

The memo applies to its own facts, so the same reasoning may not fit every case. The broader rules on losses are in crypto losses and taxes.

How is a stolen crypto tax loss calculated and reported?

The memo says the deduction is limited to the victim's adjusted basis in what was stolen, not its market value. For crypto, basis is usually what you paid, explained in what is crypto cost basis.

Timing follows section 165(e). A theft loss is treated as sustained in the year it is discovered. No deduction is allowed while there is a reasonable prospect of recovery, so a pending claim can delay it. Losses from profit-seeking transactions go on Form 4684, Section B, the IRS says. Personal losses that do qualify are reduced by $100 per event and by 10% of adjusted gross income.

What about crypto lost without a theft?

Losing a key or a price crash is not theft. The IRS pages reviewed here do not cover lost keys, and a fall in value counts only once the crypto is sold or otherwise disposed of, under the capital loss rules. For the practical steps after a scam, including reporting it, see what to do if you are scammed.

Rules differ by country and change often. Check the IRS or a qualified tax professional for your own situation.