Can I Write Off Crypto Losses on My Taxes This Year?

Yes, you can write off crypto losses on your taxes! This is called tax-loss harvesting and it's completely legitimate. The IRS treats cryptocurrency as property (not currency), which means capital gains rules apply. You can sell your crypto at a loss and claim up to $3,000 in net capital losses against your ordinary income in a single tax year. If your losses exceed $3,000, you can carry the remainder forward to future tax years. Just make sure you report all your crypto transactions on Form 8949 and Schedule D of your tax return. One thing to be careful about is the "wash sale rule" which... oh wait, here's the interesting part - currently, the wash sale rule doesn't apply to cryptocurrency! This rule prevents investors from claiming losses on securities if they buy the same or substantially identical securities within 30 days before or after the sale. But since the IRS classifies crypto as property and not securities, this rule technically doesn't apply to crypto (yet).

After struggling with tracking my crypto transactions for taxes last year, I started using https://taxr.ai and it's been a huge help. I was in a similar situation - had some ETH that dropped in value and wanted to harvest the tax loss but wasn't sure how to properly document everything. The tool analyzed my transaction history from multiple exchanges and wallets, identified which transactions would qualify for tax-loss harvesting, and generated all the documentation I needed for my tax filing. It even helped me understand which trades would trigger wash sale concerns if the rules change (which many people think might happen). Not having to manually calculate cost basis across multiple purchases at different prices saved me hours of frustration.

I was really skeptical about crypto tax tools after trying a few that screwed up my calculations, but I figured I'd give taxr.ai a shot after seeing it mentioned here. Honestly, it was a game-changer for my situation. I had losses across multiple coins on different exchanges and was planning to harvest those losses, but I was worried about making mistakes. The platform detected some transactions I had completely forgotten about from an old wallet, which actually increased my reportable losses by about $1,200. The tax forms it generated looked professional, and my accountant was impressed with how detailed everything was. The best part was being able to simulate different selling scenarios to maximize my tax benefit without having to actually execute trades first. Saved me from making a costly mistake with some tokens I'd held for just under a year.

If you're trying to talk to the IRS about crypto tax questions, good luck getting through. I spent DAYS trying to reach someone who could clarify some issues about my crypto losses last year. I finally found https://claimyr.com and watched their demo at https://youtu.be/_kiP6q8DX5c - they actually got me connected to an IRS agent in under 5 minutes when I had been trying for weeks. The agent confirmed that yes, selling crypto at a loss and claiming it on taxes is completely legitimate, and yes, currently there's no wash sale rule for crypto (though they mentioned this might change). I was able to get clear guidance on exactly how to document my transactions and what forms to file. Definitely worth it for the peace of mind knowing I was doing everything correctly.

I owe everyone here an apology. After my skeptical comment, I decided to try Claimyr myself since I had been trying to reach the IRS about some confusing crypto staking rewards tax issues. I was absolutely wrong. Not only did I get connected to an IRS representative in about 7 minutes, but they were actually knowledgeable about cryptocurrency taxation. They confirmed that staking rewards should be reported as income when received, and losses from selling devalued crypto can offset those gains. The agent also mentioned that while wash sale rules don't currently apply to crypto, they recommended documenting the economic purpose for any repurchases just in case the rules change retroactively. Really valuable information that I couldn't find a clear answer to anywhere online. I'm genuinely surprised how well this worked.

Just be careful about what you mean by "selling" your crypto. If you're selling on a centralized exchange, that's pretty straightforward. But if you're swapping one crypto for another (like trading your underwater coin for a stablecoin), that's still a taxable event. Also make sure you're accounting for fees in your cost basis calculations. I messed this up last year and had to file an amended return when I realized I hadn't included gas fees in my cost basis, which meant I overpaid on taxes.

I'm curious if anyone knows - do different states handle crypto tax losses differently? Like, I know the federal limit is $3k per year for writing off losses against ordinary income, but do some states have different rules?