Crypto losses and taxes

In the United States, selling crypto for less than you paid creates a capital loss. That loss can cancel out capital gains, and a limited amount can reduce other income. A fall in price alone does not count until the crypto is disposed of.

How do capital losses work?

A loss is realized when crypto is sold, exchanged or spent for less than its cost basis (what the owner paid). The Internal Revenue Service (IRS) has taxpayers set losses against capital gains from any source, including shares.

If total losses are larger than total gains, up to $3,000 of the excess ($1,500 for a married person filing separately) can be deducted from ordinary income such as wages each year. Anything left over carries forward to later years. The figures are reported on Form 8949 and Schedule D.

A collapsed coin that is still owned is different. In advice published in 2023, the IRS chief counsel's office said a taxpayer could not deduct a loss on crypto that had lost nearly all its value but had not been sold or abandoned. A separate guide covers what happens if a cryptocurrency goes to zero.

Does the wash-sale rule apply to crypto?

The wash-sale rule blocks a loss deduction when an investor sells stock or securities at a loss and buys substantially identical ones within 30 days before or after the sale.

As of October 2026, the rule does not expressly cover crypto. Congress's Joint Committee on Taxation noted in September 2026 that digital assets are not expressly within the statute and that the IRS has issued no guidance on the point. Critics call this a loophole.

That may change. The Digital Asset Tax Certainty Act (H.R. 10357), approved by the House Ways and Means Committee by 38 votes to 5 on September 16, 2026, would extend the rule to traded digital assets other than certain dollar stablecoins. As drafted, the change would apply to sales made after the bill was introduced in September 2026. As of early October 2026 it had not passed the House or the Senate, so the position is unsettled.

What about lost or stolen crypto?

Since the 2018 tax year, the IRS has generally allowed individuals to deduct personal theft losses only when they are tied to a federally declared disaster.

There is an exception for losses in a transaction entered into for profit. In a memorandum released in March 2025, the IRS chief counsel's office said victims of investment fraud such as a pig-butchering scam could qualify for a theft loss deduction, while victims of romance scams could not.

Crypto made unreachable by a lost seed phrase or private key is less clear, and the IRS pages reviewed for this guide do not address it.

Tax rules differ by country and state, and they change. Check the IRS or a qualified tax professional for your own situation.