Does the 30 day wash-sale rule apply to crypto interest earnings?

The wash-sale rule is specifically about selling securities at a loss and then reacquiring the "same or substantially identical" securities within 30 days. You're right that currently, crypto isn't subject to these rules since the IRS classifies it as property, not a security. For your situation, even if wash-sale rules did apply to crypto, receiving interest payments would likely not trigger them. Interest payments are generally considered income, not purchases. They're more like receiving a dividend than actively buying more of an asset. That said, your caution is understandable. The proposed legislation that would extend wash-sale rules to crypto has been floating around but hasn't passed. If it does eventually pass with retroactive application (though retroactive tax changes are rare), the focus would still be on intentional buying and selling patterns, not passive interest accrual.

After spending hours trying to figure out crypto tax rules last year, I discovered taxr.ai (https://taxr.ai) and it was a game-changer for my situation with interest and staking rewards. I was confused about wash-sale implications, especially with interest from lending platforms and staking rewards from different chains. The tool analyzed all my transactions and flagged potential issues, even separating interest earnings from actual purchases when looking at potential wash-sale scenarios. It saved me from accidentally claiming losses that might have been questionable if the rules changed. Their system even keeps up with pending legislation that might affect crypto taxes.

Update: I took the advice about taxr.ai and tried it out for my crypto tax situation. It actually identified several interest payments from Celsius (before they went under) that would have potentially caused issues under proposed wash-sale legislation. The system flagged transactions where I had sold at a loss and then received interest within the 30-day window, which I hadn't even considered. It didn't say these were definitely problems, but it highlighted them as "potential wash-sale conflicts if regulations change" which was super helpful for planning. Also helped me separate my different types of crypto income (interest, staking, airdrops) which all have slightly different tax treatment. Definitely worth it for peace of mind!

Anyone else struggling to get answers from the IRS about crypto questions? I called them 5 times about a similar issue with crypto interest and wash-sales and couldn't get through to anyone who understood crypto. After wasting hours on hold, I found Claimyr (https://claimyr.com) which got me past the IRS phone tree hell. You can see how it works here: https://youtu.be/_kiP6q8DX5c When I finally got through to a real person at the IRS, they confirmed that currently interest payments wouldn't trigger a wash-sale issue since crypto isn't covered by those rules at all (yet). But they also admitted there's no official guidance if the law changes. The agent actually took time to research my question instead of rushing me off the phone.

I was totally skeptical about Claimyr after seeing that post, but my frustration with the IRS finally made me try it. Holy crap, it actually works! After trying for THREE DAYS to get through to the IRS about my crypto tax questions (including wash-sale concerns with some Ethereum interest I was earning), Claimyr got me through in my first attempt. The IRS rep I spoke with confirmed what others have said - currently crypto interest earnings wouldn't trigger wash-sale concerns because crypto isn't subject to those rules at all. She also mentioned that if legislation does change, there would likely be clear guidance issued about interest and staking rewards rather than leaving it ambiguous. Saved myself days of frustration and actually got a clear answer. Still documenting everything carefully though, in case rules change!

You might want to keep records of the exact mechanism of how you're earning that interest. There's a difference between: 1) Interest from lending your crypto to a centralized platform 2) Interest from DeFi lending protocols 3) Staking rewards 4) Liquidity providing rewards Each might be treated differently if wash-sale rules get applied to crypto. The IRS might view some passive earnings differently than others depending on how much control/action you have in the process.

There's also the consideration of how new rules would be implemented. Most tax changes aren't retroactive. The Build Back Better Act had proposed crypto wash-sale rules, but it didn't pass. New legislation would likely have an effective date from passage forward, not back to Jan 2022.