How to harvest crypto tax losses and report them
Selling coins below what you paid makes the loss real, so it can offset gains and a limited amount of ordinary income, once you keep cost basis records.
Vahe HakobyanEditor-in-chief
Updated Oct 6, 20263 min readFact-checked
On this page
- Crypto is property for tax purposes, so a disposal is taxable.
- Only a completed disposal creates a reportable loss.
- Cost basis and proceeds set each loss.
- The wash-sale rule generally does not reach crypto.
The IRS treats digital assets as property rather than currency, so a price drop alone does nothing for your tax bill. A loss becomes real when you sell, swap or spend the coin.
What you need before you start
Only realized losses count. A coin that fell in value in your wallet gives you nothing to deduct, because you have not disposed of anything. The IRS taxes four events: selling crypto for dollars, swapping one crypto for another, paying with crypto and earning crypto as income.
How to harvest losses step by step
Each disposal has its own gain or loss. Work it out before you sell, and check the wash-sale rule first.
- 1List your losing positionsCompare what each coin is worth now with what you paid, and flag the ones below cost.
- 2Add up your cost basisInclude the price you paid and any fees. That total is your basis in the coin.
- 3Calculate each lossSubtract your basis from the proceeds. A negative result is the loss you report.
- 4Check the wash-sale ruleThe rule blocks a deduction when you buy a security back soon after selling it. Crypto is property, not a security, so it usually does not apply, but proposed US rules could change that.
- 5Sell and record the tradeNote the date, quantity, price and fees right after the sale.
After you harvest: reporting and records
Report each disposal on your IRS capital gains forms for the year. Exchanges often report what you received but leave your cost basis blank, so your own records decide the loss you can support. Different rules may apply if coins were stolen or became worthless.
Frequently asked questions
Capital losses offset capital gains first. After that, a limited amount can offset ordinary income each year, and less for married couples filing separately.
They carry forward indefinitely and keep their short-term or long-term character.
Yes. Your return combines disposals from every exchange and wallet, so keep records for each.
