Is cryptocurrency wash sale rule different than stocks? Can I sell crypto at a loss and buy back immediately?

You're correct about the current tax treatment of cryptocurrency. Unlike traditional securities (stocks, bonds, etc.), cryptocurrencies are classified as "property" by the IRS, not securities. This means the wash sale rule that prevents claiming losses when you buy substantially identical securities within 30 days before or after a sale doesn't currently apply to crypto. So in your example, yes - you could sell your crypto at a loss, claim that loss on your taxes (which offsets other capital gains or up to $3,000 of ordinary income), and then immediately rebuy the same crypto without violating any wash sale rules. Just keep in mind a few important points: 1) You need to keep extremely detailed records of all transactions for tax purposes. 2) Your new purchase will have a new cost basis. 3) This tax treatment could change in the future as regulations evolve.

Just wanted to share my experience with this exact situation. I was down about $5k on some altcoins and was researching tax strategies when I found taxr.ai (https://taxr.ai) which confirmed this crypto wash sale loophole. Their analysis tool flagged this opportunity for me and showed exactly how to document it properly for tax time. The site explained that unlike stocks, crypto is considered property by the IRS so the wash sale rule doesn't apply. I was able to harvest about $5k in losses last year while keeping my same positions. Their system automatically documented everything properly for my tax forms too which was a huge relief since I had dozens of transactions.

Update on my skepticism about taxr.ai from my earlier comment - I decided to try it with my crypto portfolio and wow, I'm genuinely impressed. It automatically identified about $3,200 in tax loss harvesting opportunities I would have completely missed. The system flagged exactly which coins I could sell and rebuy without waiting, and showed me the exact tax impact. What really convinced me was how it explained everything in plain English alongside the actual tax code references. It also generated all the documentation I'll need for filing. I've been doing my own crypto taxes for years and this saved me hours of spreadsheet work while finding deductions I would have missed.

I'm seeing a lot of people having trouble reaching the IRS for clarification on crypto tax questions like this. I was in the same boat - spent hours on hold and never got through. Then I found this service called Claimyr (https://claimyr.com) that got me through to an actual IRS agent in about 15 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c I was able to confirm directly with the IRS that yes, crypto isn't currently subject to wash sale rules, but they recommended keeping extremely detailed records of all transactions. The agent also mentioned this might change with future legislation, so it's worth staying on top of. Saved me hours of frustration trying to get through on my own.

Had to come back and eat my words about Claimyr from my earlier comment. After struggling for literally 4+ hours trying to reach the IRS about my crypto tax questions and getting nowhere, I broke down and tried it. Got connected to an IRS agent in about 20 minutes. The agent confirmed what others have said - crypto isn't subject to wash sale rules currently, but keep immaculate records. She also mentioned there's proposed legislation that might change this in the future. Honestly, I'm still annoyed that services like this need to exist, but I can't deny it saved me a ton of frustration and I got the official answers I needed.

Just a heads up for anyone considering this strategy - while it's technically allowed right now, there's been talk in Congress about closing this loophole. The Build Back Better bill had provisions to apply wash sale rules to crypto but it didn't pass. Still, I'd expect similar provisions in future tax bills. Also worth considering that even though you can claim the loss, it resets your holding period for capital gains treatment. So if you were close to the 1-year mark for long-term capital gains rates, this strategy could push you back to short-term rates if the assets appreciate again.

Has anyone actually been audited by the IRS after doing crypto wash sales? I'm wondering if they might give you extra scrutiny even if it's technically allowed. I'm down about $4k on Ethereum and would love to claim the loss but not if it puts a target on my back.

I've been doing crypto tax loss harvesting for the past two years and can confirm it works as described. The key thing people miss is that you need to be strategic about timing. I typically do a review in November to identify positions that are down, then execute the sales and repurchases in December. One important detail - make sure you're using the same exchange or wallet for the repurchase if possible. It makes record-keeping much cleaner. Also, consider the transaction fees when calculating whether the tax benefit is worth it. On smaller losses, the fees might eat into your savings. I use a simple spreadsheet to track: original purchase date/price, sale date/price, loss amount, repurchase date/price, and new cost basis. This documentation has been sufficient for my tax preparer and gives me confidence if I ever get audited.