Can I Write Off Crypto Losses on Taxes While Continuing to Invest?

I've been steadily putting money into this cryptocurrency throughout the year, about $1350 total so far. My average cost per coin has been around $1.95, but right now the coin is trading below $1.30, which obviously puts me at a loss. From my research, it looks like you can write off up to $3000 per year of realized capital losses after you sell your investments. I'm still bullish on this crypto long-term and want to keep investing in it. Would it be smart to sell all my tokens at the end of the year, take the loss, claim it on my taxes, and then just buy back in? Or would this cause problems? I'm trying to at least get some tax benefit while I wait for my investment to hopefully recover. Has anyone done this with crypto before?

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18 comments

Naila Gordon

•8M

What you're describing is a tax-loss harvesting strategy, and yes, it's a legitimate way to offset capital gains or up to $3000 of ordinary income per year. The IRS treats cryptocurrency as property, so capital gains rules apply. But watch out for the "wash sale rule" - oh wait, actually cryptocurrencies currently have a loophole here. Unlike stocks, the wash sale rule doesn't currently apply to crypto. This rule normally prevents you from claiming a loss if you buy the same or substantially identical security within 30 days before or after selling at a loss. Since crypto isn't technically a "security" under current IRS guidance, you could sell your coins at a loss, claim the deduction, and immediately repurchase the same crypto. Just keep very detailed records of all transactions because crypto reporting requirements are getting stricter.

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Naila Gordon

•8M

Yes, you can currently do that with crypto because of how it's classified by the IRS. The wash sale rule (Section 1091 of the tax code) specifically applies to securities, and crypto hasn't been officially classified as a security for tax purposes. I definitely think this loophole will close soon. There's already been proposed legislation to treat crypto the same as securities for tax purposes. So I wouldn't count on this strategy being available forever. If you're going to use it, document everything meticulously - transaction dates, prices, fees, etc. The IRS is increasingly focused on crypto compliance.

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Darren Brooks

•8M

I went through this exact situation last tax season and found this amazing tool called taxr.ai (https://taxr.ai) that saved me so much headache with my crypto taxes. I had been doing small DCA buys all year across different platforms, and tracking the cost basis was driving me insane. What I like about taxr.ai is that it specifically handles crypto tax-loss harvesting strategies. I uploaded my transaction history, and it showed me exactly which coins I could sell for losses, how much I could deduct, and even calculated the best timing. The tool identified about $2100 in deductible losses I could take while still keeping my overall crypto exposure.

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Darren Brooks

•8M

It gives you both options - direct API connections with major exchanges or CSV uploads. I connected my Coinbase directly, but uploaded CSVs for my other exchanges. It reconciled everything automatically and flagged transactions that seemed duplicated across platforms. Security is their priority - they use bank-level encryption and don't store your exchange credentials. For DeFi transactions, yes it handles those too! I had some Uniswap trades and liquidity pool earnings, and it calculated everything correctly. The DeFi stuff requires connecting your wallet addresses, but it's just reading transaction data from the blockchain, not accessing your actual wallet.

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Elliott luviBorBatman

•8M

Just wanted to follow up about taxr.ai - I decided to try it after my skepticism and wow, it actually works amazingly well. I uploaded my messy collection of transactions (some dating back to 2017 that I never properly documented) and it organized everything. The tax-loss harvesting feature identified about $2800 in losses I could claim by selling certain positions. I executed those trades last week and the tool automatically updated my tax forms. I was especially impressed with how it handled my forgotten staking rewards that I'd never been tracking properly. Definitely going to use this for my 2025 filing. Way better than the spreadsheet nightmare I was dealing with before.

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Demi Hall

•8M

For anyone dealing with crypto tax questions, I had a similar issue and needed to talk to an actual IRS agent to get clarification. I was on hold FOREVER until I found this service called Claimyr (https://claimyr.com). They have this demo video (https://youtu.be/_kiP6q8DX5c) that shows how it works. Basically, they hold your place in the IRS phone queue and call you when an agent picks up. I was super skeptical at first but was desperate after trying to get through for 3 days. Submitted my number on their site and about 2 hours later got a call connecting me directly to an IRS agent. The agent confirmed that crypto tax-loss harvesting is currently allowed even without the 30-day waiting period, but emphasized keeping extremely detailed records of every transaction. She also mentioned there's a good chance the rules will change, so don't count on this strategy forever.

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Demi Hall

•8M

They use an automated system that waits on hold for you. Instead of you listening to the hold music for hours, their system does it, and when a human IRS agent picks up, that triggers their system to call you and connect you directly to that agent. No more waiting on hold! I was totally in your camp before trying it. I spent literally 3 days trying to get through to the IRS myself - getting disconnected, waiting for hours, etc. With Claimyr, I submitted my info, went about my day, and 2 hours later was talking to an actual IRS agent. The best part was I didn't have to actively wait by my phone - I was grocery shopping when they called and connected me.

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Kara Yoshida

•8M

Need to eat my words here. After posting my skeptical comment, I was still desperate to talk to the IRS about my crypto situation (had some weird mining income questions too), so I tried Claimyr. It actually worked. Submitted my info around 9am, got a call at 11:45am connecting me to an IRS agent. I nearly fell out of my chair when it happened. The agent helped clear up my questions about tax-loss harvesting with crypto and some mining income reporting requirements. For anyone wondering about the original question - yes, the IRS agent confirmed you can currently sell crypto at a loss, claim the deduction (up to $3k against ordinary income), and immediately repurchase. BUT he strongly emphasized keeping immaculate records and said there's legislation in the works that might close this loophole.

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Philip Cowan

•8M

Important distinction on the $3000 limit - that's only for deducting capital losses against ordinary income. If you have capital gains from other investments (stocks, property, other crypto), you can offset those completely before hitting the $3000 limit. For example, if you had: - $5000 in stock gains this year - $7000 in crypto losses You could offset the entire $5000 in gains, plus deduct $2000 from your ordinary income. The remaining $2000 in losses would carry forward to next year.

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Philip Cowan

•8M

Yes, you can absolutely specify which coins you're selling for tax loss harvesting. You're not required to sell all your underwater positions - you can strategically choose which specific coins and even which specific lots if you've bought the same coin at different times. If you have three different cryptocurrencies at a loss, you can choose to sell just one or two and keep holding the other. You might base this decision on which coins you're least confident about long-term or which would give you the biggest tax benefit. Some tax software lets you optimize this by showing which sales would be most beneficial.

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