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Your Crypto Tax Answers

Learn about crypto taxes in the US, Australia, and Germany with insights from professional crypto tax accountants while discovering the best crypto tools in the market.

Do I have to report crypto on taxes if I lost money?

Updated: Jun 17, 2022

Do you have to report cryptocurrency on taxes if you have losses?

You have to report all of your taxable crypto transactions to the IRS, regardless of whether you have a gain or a loss.

Let’s explore more about what you have to report on crypto taxes if you lose money, what you can write off on your taxes, what happens if you don’t report crypto, and how crypto losses can be used to reduce your crypto tax bill.

In this article:

Can you claim crypto losses?

Yes, you can claim crypto losses from your crypto trading activity in the US. You can claim a net loss deduction of up to $3,000/year (valid for 2022).

In the US, you need to track your crypto transactions and report your gain/loss on each of your crypto trades. You need to report your crypto losses even if you only have one crypto trade during the tax year and that trade was a capital loss.

Can you write off crypto losses on taxes?

Yes, each year, you can claim up to $3,000 of net capital losses from your crypto and other trading activities. If you had more than $3,000 of losses in total, you can deduct $3,000 for the current tax year and carry over the remaining to the following years until you fully utilize all the losses.

If you have a lot of capital gains from some crypto trades and a loss of $3,000 or less from other crypto trades, you can offset those gains by the amount of losses you had.

Can I claim an unrealized loss on my taxes?

No, you cannot claim a tax benefit from unrealized losses. You need to realize the losses (i.e., by executing trades) by the end of the tax year to get the write-off opportunity to offset your other crypto gains.

Can I claim a crypto loss on my income?

You can claim a net capital loss deduction for up to $3,000 each year from your crypto losses. That’s the maximum amount of capital loss you can use to offset your income.

Even if you have income from crypto activities like airdrops, salaries, hard forks, crypto staking rewards, crypto interest, or NFT sales as a creator, you cannot deduct losses from it.

Can I deduct losses from crypto hacks?

In most cases, you won’t be able to deduct crypto losses from hacks on exchanges or wallets in the US. The current tax law determines that crypto losses from these hacks are treated as a personal casualty loss, which is no longer tax-deductible.

However, if you’re a qualified investor, you may be able to claim a loss deduction if you suffered a qualified loss under Revenue Procedure 2009-20. Reach out to a tax professional to evaluate your situation.

Can I deduct losses from rugged coins?

You might be able to deduct losses on a coin from a rug if you can prove it has no Fair Market Value and you cannot sell it anywhere.

Check these 3 steps that a professional tax account recommends for these scenarios.

Can I write off lost crypto?

In most cases, you won’t be able to write off lost crypto (e.g., boating accident) because personal casualty losses are not tax-deductible.

Do I pay taxes on crypto if I lose money?

You may pay taxes on crypto income even if you only have losses from crypto trades.

Crypto income is taxed at the ordinary income level, while crypto trading, crypto-to-FIAT, and crypto-to-crypto trades are taxed at a capital gains level.

Crypto income may come from an airdrop that you receive, and you’ll be taxed at the Fair Market Value (in USD) of the crypto you received. If you have losses from crypto trading, you won’t pay taxes on it, but you’ll need to report those alongside your crypto income.

How to report crypto losses?

In the US, you need to report your crypto losses and gains on your tax return each year. To become tax compliant, you need to report your crypto gain/loss on Form 8949 and Schedule D of your Form 1040.

To make the process of crypto tax reporting easier, you can use a crypto tax software like CoinTracking to import all of your crypto trades, get your gains calculated automatically, and generate tax reports.

Learn more on how to report crypto taxes.

What happens if I don’t report my crypto?

In the US, if you don’t report crypto on taxes, you may face penalties, fees, or even criminal charges.

Learn more about what happens if you don’t report your crypto on taxes.

How do you escape crypto tax?

You can reduce your crypto taxes in many ways, including crypto tax-loss harvesting, wash sale rule, moving to a crypto tax-friendly country, donating crypto, etc.

Crypto tax-loss harvesting lets you sell a crypto position that loses most of its value and use that loss to offset your other capital gains. This is based on the wash sale rule that still does not apply to crypto until 2023. You can still buy and immediately sell a crypto position for a loss and claim that loss in your taxes.

Moreover, you can use your $3,000 annual net capital loss deduction to effectively reduce your crypto tax bill.

Learn how to generate tax reports with CoinTracking:

The best crypto tax software: CoinTracking

The best crypto tax software in the market is CoinTracking.

You can import your trades using CSV or API, track your gains/losses, and generate tax reports according to your preferred accounting method.

CoinTracking is your full crypto tax solution for:

Moreover, CoinTracking can easily classify all your earnings from yield farming, liquidity pools, crypto staking, and much more.

Crypto taxes with no errors: CoinTracking Full Service in the US.

CoinTracking also offers a Full Service for US traders. A crypto reconciliation tax expert from Polygon Advisory Group, a leading US crypto tax firm, will review your CoinTracking account, help fix any errors, and ensure you submit your crypto tax reports error-free.

Do you have any crypto tax questions? Check the best guides:

  1. Do you pay taxes on crypto margin trading?

  2. How are rebase token protocols taxed?

  3. Do you pay taxes on fan tokens?

  4. What happens if you don't file your crypto taxes?

  5. Do you pay taxes when trading stablecoins?

  6. How is Yield Farming Taxed?

  7. DeFi Taxes: The Complete Guide.

  8. How to save taxes with a Bitcoin IRA.

  9. Do you pay taxes for receiving Bitcoin tips?

  10. Uniswap Taxes Guide

  11. Is wrapping crypto taxable?

  12. How to calculate taxes with Bitcoin dollar-cost averaging?

  13. Do you pay tax on stolen, hacked, or lost crypto?

  14. FIFO for crypto taxes? Implications of accounting methods.

  15. NFT Taxes: The Complete Guide.

  16. Is Bitcoin taxable? The ultimate guide for 2021 taxes.

  17. Top crypto tax friendly countries.

  18. How to reduce your crypto taxes?

  19. Crypto tax loss harvesting: Here’s what you need to know

This post is part of the Crypto Taxes AMA series. Follow our weekly AMAs on Twitter where our expert CPA, Sharon Yip answers your crypto tax questions. You can download 35+ AMA crypto tax reports for free.

Disclaimer: All the information provided above is for informational purposes only and should not be considered as professional investment, legal, or tax advice. You should conduct your own research or consult with a professional financial advisor when investing.

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