What is crypto tax-loss harvesting?

Crypto tax-loss harvesting is the practice of selling crypto that is worth less than you paid for it so the loss counts on your tax return. In the US, the IRS treats crypto as property, so a realized loss can reduce your taxable capital gains. The open question in 2026 is whether Congress will extend the wash sale rule to crypto.

How does harvesting crypto losses work?

Under US rules, a capital loss is only recognized when you sell or otherwise dispose of the asset. A coin that has dropped in value but is still in your wallet produces no deduction.

Once realized, losses first offset capital gains. If losses exceed gains, the IRS lets you deduct up to $3,000 of the excess against other income ($1,500 if married filing separately), and carry the rest forward to future years. Whether a loss is short-term or long-term depends on whether you held the asset for one year or less, or more than one year. Sales are reported on Form 8949 and Schedule D. For the basics, see crypto losses and taxes and crypto tax forms.

Does the wash sale rule apply to crypto?

Not yet, for most crypto. The wash sale rule blocks a loss on stock or securities if you buy the same or a substantially identical investment within 30 days before or after the sale. Because Section 1091 of the tax code refers only to stock and securities, and the IRS treats crypto as property, selling bitcoin at a loss and buying it back soon after does not currently trigger the rule. Crypto that is itself a security, such as some tokenized stocks, is a different case.

That could change. On September 16, 2026, the House Ways and Means Committee approved the Digital Asset Tax Certainty Act (H.R. 10357) by a 38 to 5 vote. It would disallow a loss on a traded digital asset if the same or a substantially identical asset is bought within 30 days before or after the sale, with qualified US dollar stablecoins excluded. As approved in committee, it would apply to sales after September 14, 2026. An earlier bill, H.R. 9172, proposed similar rules in June 2026.

As of October 11, 2026, neither bill is law. H.R. 10357 still needs a full House vote, Senate passage and the President's signature, and a vote was not expected until after the November elections.

What should you keep in mind?

Because the pending bill is written to reach back to mid-September 2026, losses taken now could be affected if it passes in that form. Good records matter either way: dates, amounts and cost basis for every sale and repurchase. A loss also reflects a real drop in value, so harvesting changes when tax is paid rather than making a losing trade profitable. For the wider picture, see how crypto is taxed in the US.

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