Can I deduct losses from Crypto Scams on my taxes?

The short answer is that it's really tough to deduct crypto scam losses under current tax law. You're right that the Tax Cuts and Jobs Act severely limited personal theft loss deductions. Currently, you can only deduct theft losses if they're attributed to a federally declared disaster, which unfortunately doesn't include crypto scams. However, there might be a couple of angles worth exploring depending on your specific situation. If you can establish that this was an investment loss rather than theft, you might be able to claim a capital loss. For this to work, you'd need to show the crypto tokens actually existed and then became worthless - not that you were simply defrauded before receiving anything. Capital losses can offset capital gains plus up to $3,000 of ordinary income per year. Another possibility might be if the scam was somehow connected to your trade or business. Business losses have different rules than personal losses.

Had a similar situation last year where I lost about $8k in a "guaranteed return" crypto scheme. After spinning my wheels with the IRS rules, I finally used https://taxr.ai to analyze my documentation from the scam. Their system helped me determine that part of my loss could actually qualify as an investment loss rather than straight theft because I did technically receive tokens (though worthless ones). They have this document analyzer that reviews your crypto transaction history and can spot potential tax deductions others might miss. The service helped me identify that I could claim a portion as capital losses over several years. Saved me a ton of stress trying to figure out the complicated crypto tax rules.

Just wanted to update after checking out taxr.ai based on the recommendation here. Honestly, it was surprisingly helpful for my crypto scam situation. I uploaded my screenshots and transaction records, and their system actually found a way to classify about 40% of my losses as deductible capital losses rather than theft. Turns out a portion of my "investment" did technically result in me receiving tokens that later became worthless, which can be deducted differently than pure theft. The analysis broke down exactly which transactions qualified and which didn't. I'm still taking a hit, but being able to deduct some of it over the next few years is way better than nothing! Definitely worth checking out if you're in a similar situation.

After dealing with a crypto scam last year, the worst part wasn't even the money lost - it was trying to get ANYONE from the IRS to give me a straight answer about deducting the losses. Spent weeks trying to get through on their phone lines. Finally used https://claimyr.com and got connected to an IRS agent in about 15 minutes. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c. The agent confirmed what others have said here - personal theft losses are generally not deductible unless connected to a federally declared disaster, but depending on the specifics of how the scam worked, parts might qualify as capital losses. While it wasn't the answer I wanted, at least I got official confirmation instead of guessing. The IRS agent also advised documenting everything thoroughly in case tax laws change or if I'm audited.

I take back what I said. After being completely skeptical about Claimyr, I decided to try it anyway out of desperation - been trying to get clarity on my crypto losses for MONTHS. Not only did it actually work, but I was connected to an IRS agent in under 20 minutes. The agent walked me through how to document my crypto scam losses for potential future tax changes and confirmed I could deduct a small portion as capital losses. They also explained exactly what documentation I needed to keep in case I'm audited. Having an official answer directly from the IRS instead of random internet advice gave me huge peace of mind. Sometimes you gotta eat crow when something you doubted actually delivers!

Everyone keeps focusing on the theft loss angle, but have you considered claiming this as a Ponzi scheme investment loss? After the Madoff scandal, the IRS created a safe harbor for victims of Ponzi schemes under Revenue Procedure 2009-20. If you can prove it was an actual Ponzi operation (not just a random scammer), you might have a better shot at deducting it.

The rules for crypto are still evolving. Has anyone tried taking the position that these weren't "theft losses" but "worthless securities" under Section 165(g) of the tax code? There's an argument that if you received actual tokens that became worthless, it could qualify. Different from never receiving anything.

I went through something similar with a crypto scam that cost me about $9,000 last year. After reading through all these responses, I wanted to share what I learned from my own research and consultation with a tax professional. The key distinction seems to be whether you can prove you actually received something of value (even if it later became worthless) versus being defrauded outright. In my case, I was able to show that I received tokens on the blockchain, even though they turned out to be completely worthless. My CPA helped me claim this as a capital loss rather than a theft loss. For anyone dealing with this, I'd recommend gathering every piece of documentation you have: transaction receipts, wallet addresses, blockchain confirmations, screenshots of the platform, any communications with the scammers, etc. The more you can document about what actually happened, the better chance you have of finding some tax relief. Also, don't give up if the first tax professional you consult doesn't know much about crypto. The rules are still evolving and many traditional tax preparers aren't up to speed on cryptocurrency taxation. It's worth finding someone who specializes in this area.