Can you write off crypto losses on your taxes?

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This story is part Taxes 2023CNET’s coverage of the best tax software, tax tips, and everything you need to file and track your refund.

Let’s just say that 2022 has not been the best year for cryptocurrency.

Bitcoin, the best-known cryptocurrency, took a beating last year, dropping more than 60%, with many altcoins posting similar losses. Although the window of time to document crypto losses for the 2022 tax year is now over, knowing a few crypto tax tips can help you save money if you plan to continue investing in digital coins, stocks or other securities in the years to come.

A technique, known as tax loss harvesting, allows you to claim capital losses you have incurred on cryptocurrency, investments, or property against your taxes, to offset the tax owed on the gains. future years. When properly documented, capital losses can offset any capital gains income you had in the same year, as well as up to $3,000 of taxable income for that year. If your total losses exceed $3,000, you can carry forward the remaining balance on future years’ tax returns. We like this because it can help reduce your taxable income and potentially your tax bill.

Harvesting tax losses has its caveats. You can only claim capital losses on your crypto once the loss is “realized”, i.e. once you have sold your coins. The tax rate also varies depending on whether or not you have held a coin for more than a year. Nevertheless, last year having delivered its fair share of industry scandals, many investors who are sitting on substantial losses may simply want to sell their holdings and move on. If you do, know that you could “reap” your losses and save money on taxes for years to come.

Here’s a little more about how tax loss collection works for crypto investors, plus what credentialed experts say you should keep in mind.

Learn more: Best crypto tax software

How the IRS Classifies and Taxes Your Crypto

The IRS interprets cryptocurrency as property, not security, said Ryan Losi, CPA and executive vice president of PIASCIK, an accounting firm. “In 2014 and subsequent notices, the IRS specifically said expressly not to deal [crypto] like security, but more like property,” Losi said.

When you sell a property or asset for more than you paid, the difference is called a capital gain and is subject to capital gains tax. This tax rate varies depending on how long you have held the asset. If you have held the asset for a year or less, it is a short-term gain and will be taxed at the same tax rate as your tax rate.

Less than $10,275


$10,276 to $41,775


$41,776 to $89,075


$89,076 to $170,050


$170,051 to $215,950


$215,951 to $539,900


Over $539,900


Source: IRS

On the other hand, if you have held your assets for more than a year, the IRS calls this capital gain a long-term gain and will tax you at one of three rates for the 2022 tax year.

  • If your taxable income was $41,675 or less, your capital gains tax rate is 0%.
  • If your taxable income is between $41,676 and $459,750, the rate is 15%.
  • If your taxable income was more than $459,750, the rate is 20%.

The IRS lists some exceptions in which the rates are higher, but none of them currently apply to cryptocurrency.

Then there are capital losses. If you sell an asset for less than you paid, this is considered a capital loss. Many people who have held bitcoin since early last year are likely sitting on a substantial capital loss right now. When you sell your crypto at a loss, it can be used to offset other capital gains in the current tax year, and potentially in future years as well. If your capital losses exceed your gains, then up to $3,000 of them can be deducted from your taxable income ($1,500 if married, separate filing). Also, any loss not applied after that can be carried forward and applied to a future year’s tax return.

With me so far? When you realize a loss, it can give you tax relief. In a nutshell, it’s about reaping tax losses, and some investors do this strategically to protect their future gains.

Can you sell coins, claim the loss, then buy them back immediately?

Technically, yes. This is one of the benefits for the IRS to classify crypto as property rather than stock.

Theirs’ wash sale rule states that, if investors sell a security at a loss and then buy a “substantially identical” security within 30 days of the sale, they cannot claim those losses as capital losses on their taxes. Think of it as the IRS’ way of discouraging tons of trading (and subsequent market volatility) from people trying to thwart the process of tax loss harvesting.

Cryptocurrencies, however, are not subject to the wash sale rule as of this writing. “If their definition is then expanded by Congress, then fine, but until then crypto is not considered security,” Losi said. Remember that you cannot deduct a capital loss until it is realized. if you are currently marinating in the crypto dip, selling your coins and then buying them back at a later date is technically within limits at this time, and would allow you to realize the loss for tax purposes.

The technique is valuable enough that some cryptocurrency software companies are offering a way to automate tax loss harvesting, said Christian Rivera, CPA and founder of e-commerce accountants, an accounting firm. “What some investors do is use software tools like TaxBit to follow what is called your base in your investments. These are your realized gains or losses. If you have made gains, but also losses that have not yet been realized, [the software can] trigger these trades in order to cash in on the losses and avoid getting stuck in a huge taxable position,” Rivera said.

Consult a tax professional if you plan to implement a tax loss collection strategy on a regular basis.

How to Claim Crypto Losses on Your Taxes

When reporting crypto losses, you must first document whether they were short-term or long-term losses on Form 8949. The type of loss will matter if you also have capital gains in the same tax year, said Eric Bronnenkant, CPA and Chief Tax Officer at Betterment, a financial advisory firm. “If your winnings exceed your losses, the character of your loss can impact the net tax you pay,” Bronnenkant said. Also, the type of loss will be important if you plan to carry the loss forward to future tax years.

Form 8949 is then included on your Program, which calculates the overall net capital gain or loss. You will then attach Schedule D to your 1040 form. If you are using a cryptocurrency exchange, be sure to check and see if they have distributed a form to you, such as a 1099-MISC, so that you can match the numbers.

If you are using tax software to file your taxes this year, be aware that you may need to pay for a higher level of service in order to report cryptocurrency activity.

Learn more: Best tax software for 2023

Turn your crypto losses into tax relief

The cryptocurrency continues to face regulatory scrutiny and a volatile market. Know the tricks of the trade when it comes to claiming capital losses and you’ll be better prepared to save money on your tax return.

More tax tips

Create a Facebook account 2022
Anyone can Create a new Facebook account. if you want Create a Facebook account
or configure it, see this guide. Here you will find step-by-step
instructions on how to set up a Facebook account in different ways, how
to get a Facebook page for your business.

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naturally, How to create a Facebook account
Very simple, almost all users know, simple and not at all
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How to Create a New Facebook Account Without a Phone Number
It is a social and business website for some users, but when you have a
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day, so you will have to
Create a Facebook account another to
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to hang out with friends. Let’s learn together
How to Create a Facebook Account Without a Phone Number in the next paragraph.
How to Create a New Facebook Account Without a Phone Number
necessary process Create a Facebook account
Not tied to a phone number You have an Android phone and it just needs
to be an Android phone. Then follow these steps to create an account on
your phone without the help of a laptop:

Access the Google Play Store.

Find Facebook Lite Facebook.

Then download and install the app on your phone.

Open the app and choose the language that suits you best.

Click Create New Account.

Then fill in your first and last name.

When you reach the phone number step, you will find the registration via email at the bottom of the screen.

Click to register via email.

Type your e-mail.

Then click next and wait for the activation code to be sent to your email.

Then add the activation code.

Fill in the registration information.
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There are many ways To create a Facebook account
No need for a phone number to sign up for an account. One of the ways
is to use a number that is different from your personal number, like
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Activating a Facebook account with a fake number has disadvantages and
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Configure your Facebook profile
If you are new to this social networking platform then… Create a Facebook profile It can be stressful for you. So here are some tips to help you get started with Facebook:

a Profile Photo – You should add your photo first so your friends and
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If you are unable to log in to your Facebook account, you can recover it by following these steps:

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you’re having problems with your email, username or phone number, try
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you signed up for a Facebook account via email, you’ll need to contact
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How to create a new Facebook account
if you want it now Create a new Facebook account Using your phone number instead of your email address, you need to follow these steps:

Go to and click Create New Account.

Enter your telephone number and other personal information requested in the “Registration” form; Click “Login” when finished.

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distance Create a Facebook account newYou
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How to Create a New Facebook Account on Your Computer
Here we will learn how to create a new Facebook gmail account on computer, and here are the necessary steps:

Turn on the computer and launch the browser.

Click Create New Account.

After that, a window will appear where you need to enter:

Your first and middle name.

Your gmail (which we created earlier).

Account password.

After completing these steps, you have to click on Create a Facebook account.

After that, a window will appear asking you to confirm the email as follows:

you have to do is go to your email inbox and you will find a message
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After entering the code, click Confirm below.

so you did Create a new Facebook account on Gmail.
Create a Facebook account on your phone
When using your phone to create a new Facebook Gmail account, you must first Download the Facebook app from Google Play
If you are using a phone with limited specs, not enough storage space
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Open the Facebook app.

Click Create a new account and grant it to Facebook Permissions to complete account creation.

In the next window, click on the Next option to start creating a new email account on your phone.

Enter your name and tap Next, select your date of birth by month, day and year and tap Next again to go to the next step.

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