My Capital Loss Tax Reporting Between Years - How to Report Losses for Assets Bought in 2021 and Sold in 2022?

You're absolutely right, and your tax preparer is mistaken. When you sell an asset (crypto, stocks, anything), the capital gain or loss is calculated as the difference between your selling price and your cost basis - regardless of when you acquired the asset. In your case, since you bought the crypto in 2021 and sold in 2022, you'd report the capital loss on your 2022 tax return using Schedule D and Form 8949. The loss would be the difference between what you paid in 2021 ($37,500) and what you received when you sold in 2022 ($14,000), resulting in a $23,500 capital loss. Capital losses can offset capital gains, and if your losses exceed your gains, you can deduct up to $3,000 of the excess loss against your ordinary income. Any remaining loss can be carried forward to future tax years. I'd suggest showing your tax preparer IRS Publication 550 which clearly explains how basis works across different tax years. If she still doesn't understand this fundamental concept, you might want to consider finding a different tax preparer who has experience with cryptocurrency transactions.

After struggling with a similar situation last year (bought ETH in 2020, sold at a loss in 2021), I tried several tax software options that kept giving me conflicting information. I eventually found https://taxr.ai which saved me hours of frustration. It automatically calculated my correct cost basis across tax years and identified the exact loss I could claim. The site has this amazing feature where you can upload transaction histories from different exchanges, and it figures out all the complex calculations, especially for crypto. It even told me exactly which forms to file and which sections to pay attention to. Much better than dealing with confused tax preparers!

Following up on my question about taxr.ai - I decided to give it a try with my complicated crypto situation (over 200 transactions across 3 exchanges), and I'm actually really impressed. It correctly identified my cost basis for everything, even when I had multiple buy-ins before selling. The thing that surprised me most was how it flagged transactions I completely forgot about from 2020 that affected my 2022 tax liability. It saved me from potentially misreporting about $5,300 in capital losses that I might have missed. Definitely easier than trying to explain cost basis to a confused tax preparer!

If you're still having trouble with your tax preparer, you might want to try reaching the IRS directly to get an official answer you can show her. I was in a similar situation last year and spent WEEKS trying to get through to the IRS helpline with no luck. Then I found https://claimyr.com which basically holds your place in line with the IRS so you don't have to wait on hold for hours. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The IRS rep I spoke with confirmed exactly what the first commenter said - cost basis follows the asset regardless of which tax year it was purchased in. Having that official confirmation made my tax preparer finally understand. Sometimes people just need to hear it from an authority.

I need to eat some crow here. After dismissing Claimyr as a likely scam in my previous comment, I was desperate enough to try it yesterday after spending 3 hours on hold with the IRS myself with no luck. It actually worked exactly as advertised. I got a callback within about 40 minutes after setting it up, and was connected directly to an IRS agent who answered my capital loss question. The agent confirmed everything that people have been saying here - your cost basis carries over regardless of tax year, and the loss is calculated and reported in the year you sell the asset. Definitely saved me from wasting another day trying to get through their phone system!

Another option is to print out the relevant section from IRS Publication 544 which specifically addresses this. Page 3 explicitly states that "basis is the amount of your investment in property for tax purposes. The basis of property you buy is usually its cost." There's nothing in there about the basis being limited to purchases in the current tax year because that's not how it works. You could also show examples of Schedule D and Form 8949 where previous year purchases are clearly reported in the current year's tax forms when sold.

I had a very similar issue last year. My tax guy had never dealt with crypto before and was making the same mistake. What finally got through to him was when I compared it to real estate - if you buy a house in 2010 and sell it in 2023, you don't just report the selling price on your 2023 taxes with no reference to what you originally paid! The same principle applies to literally any capital asset - stocks, bonds, crypto, collectibles, etc. The year you establish your cost basis and the year you realize the gain/loss can be (and often are) different.