How To Report Crypto Losses On Your Taxes

What Counts As A Crypto Loss?

A crypto loss happens when you dispose of a digital asset for less than its cost basis. The IRS treats crypto as property, so a loss on Bitcoin, Ethereum or an NFT works like a loss on a stock.

Each of these is a taxable event that can produce a gain or a loss:

• Selling crypto for dollars or another government currency
• Swapping one crypto for another, such as BTC for ETH
• Spending crypto on goods, services or an NFT

Holding a coin that has fallen in value isn't a taxable event. You can claim the loss only after you lock it in by selling or trading the asset. Getting paid in crypto is income at the coin's value on the day you receive it, as our crypto tax rates article explains, and that value becomes your basis for any later loss.

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How To Calculate A Crypto Loss

Subtract your cost basis from your proceeds. Basis is what you paid, including purchase fees. Proceeds are what you received, minus selling fees.

Say you bought 1 BTC for $42,000 and later sold it for $20,700. Your loss is $20,700 minus $42,000, or $21,300. If you also bought an NFT for $5,000 and sold it for $3,000, that's a $2,000 loss, for $23,300 in total.

List each sale separately. The IRS wants every transaction, not a single net number, and since Jan. 1, 2025 you must match each sale to the coins held in the wallet or account you sold from.

How Crypto Losses Reduce Your Taxes

Losses are applied in a set order. Using the $23,300 of losses above, here's how they would work for someone who also has $6,000 of crypto gains and $10,000 of stock gains in the same year.

Next year, the $4,300 carryover offsets any capital gains first, then up to $3,000 of income again, according to IRS Topic 409. Carryovers keep their character, so a long-term loss carries over as long-term.

Short-term and long-term results are netted separately before they're combined. A short-term loss is worth more when it offsets short-term gains, which are taxed at regular income rates of up to 37%, than when it offsets long-term gains taxed at 15% or 20%.

How To Report Crypto Losses On Your Return

You report crypto losses in three places.

1. Form 8949: list each sale, with the date you bought it, the date you sold it, proceeds, cost basis and the gain or loss. Use the checkboxes for digital asset sales reported on Form 1099-DA, and separate short-term from long-term sales, per the Form 8949 instructions.
2. Schedule D: total the Form 8949 results, net short-term against long-term, and apply the $3,000 limit. The Schedule D instructions include the capital loss carryover worksheet.
3. Form 1040: answer "yes" to the digital asset question if you sold or exchanged any crypto during the year.

If your broker's 1099-DA leaves cost basis blank, which is common for coins bought before 2026, enter the basis yourself from your records. A blank basis can make a loss look like a gain.

Crypto tax software such as CoinLedger or ZenLedger builds Form 8949 for you and tracks carryovers from year to year.

Special Cases: Stolen, Scammed And Worthless Crypto

Not every lost coin produces a deductible capital loss. The answer depends on how you lost it.

Can You Claim Stolen Crypto As A Loss?

Usually not, if the crypto was personal property. Since 2018, personal theft and casualty losses are deductible only when caused by a declared disaster, and the One Big Beautiful Bill Act made that limit permanent in 2025.

There's an exception for theft from a transaction entered into for profit. In Chief Counsel Advice 202511015, released in March 2025, the IRS concluded that victims of some investment scams, such as "pig butchering" schemes where the victim transferred crypto expecting a profit, can deduct the theft loss under section 165(c)(2). Victims of romance or impersonation scams who sent crypto with no investment motive generally can't. Talk to a tax professional before claiming a theft loss, and see our crypto scams article for how these schemes work.

What About Worthless Or Abandoned Tokens?

A token that drops to near zero isn't automatically deductible. In Chief Counsel Advice 202302011, the IRS said that abandoning a token isn't a sale, so the loss isn't a capital loss. A loss under section 165 for abandoned personal-investment property falls into miscellaneous itemized deductions, which aren't allowed.

The practical route is to sell the token, even for a fraction of a cent, if any market or buyer exists. A sale creates a capital loss you can report on Form 8949.

Losses From Bankrupt Exchanges

Customers of failed platforms such as FTX and Celsius generally claim a loss only when it's clear how much they won't get back. Both bankruptcies have paid distributions to creditors, which change the size and timing of any loss. Report the final result based on what you received compared with your basis, and keep the bankruptcy claim records.

The Wash Sale Rule And Crypto

The wash sale rule, which blocks a loss when you buy back the same security within 30 days, doesn't apply to crypto held directly under current US law, because crypto is property and not a security. That means you can sell crypto at a loss and buy it back right away.

That could change. The Digital Asset Tax Certainty Act (H.R. 10357), approved by the House Ways and Means Committee on Sept. 16, 2026, would apply the wash sale rule to most digital assets if enacted. The full House hadn't voted on it as of Nov. 2, 2026, so it isn't law. Crypto ETFs are securities, so the wash sale rule already applies to them. Our crypto wash sale article has the details.

Crypto Losses Outside The US

Other countries handle crypto losses their own way.

• United Kingdom: losses offset gains in the same or later years, but you must claim a loss with HMRC within four years of the end of the tax year you disposed of the asset, according to GOV.UK. A 30-day matching rule applies when you rebuy the same token, per the HMRC cryptoassets manual.
• Canada: capital losses offset capital gains, and the superficial loss rule denies a loss if you rebuy the same crypto within 30 days, according to the Canada Revenue Agency.
• Australia: capital losses offset capital gains only, not other income, and unused losses carry forward, according to the ATO.

What To Watch Out For

• Missing basis: a 1099-DA without basis can turn a real loss into a reported gain.
• Unrealized losses: a coin that's down but unsold doesn't count.
• Unmatched transfers: moving coins between your own wallets isn't a sale. Software sometimes logs a transfer as a sale at zero, which creates a fake loss.
• Recovery scams: people who lost crypto are targeted by fake "recovery" services. Our article on filing a complaint against a crypto exchange lists legitimate places to report.
• Changing rules: wash sale treatment for crypto is pending in Congress.

FAQ

How Much Crypto Loss Can I Deduct?

There's no limit on how much loss can offset capital gains. Beyond your gains, you can deduct up to $3,000 of net capital losses from other income each year, or $1,500 if married filing separately. The rest carries forward.

Do I Have To Report Crypto Losses?

Yes. Every sale or swap goes on Form 8949, whether it's a gain or a loss. Reporting losses also lets you use them, so leaving them off costs you money.

Can I Deduct Crypto I Lost In A Scam?

Possibly, if you transferred the crypto expecting an investment profit. The IRS said in 2025 that some investment scam victims can deduct the loss as a theft from a transaction entered into for profit. Personal theft with no profit motive generally isn't deductible.

Can I Sell Crypto At A Loss And Buy It Back?

Under current US law, yes, because the wash sale rule doesn't cover crypto held directly. A pending bill would change that, and other countries, such as Canada and the UK, already have 30-day rules.

Do Crypto Losses Expire?

No. In the US, unused capital losses carry forward indefinitely until you use them. They're lost only when the taxpayer dies.

What If I Lost My Private Keys?

Lost keys don't create a sale, so the IRS doesn't treat them as a capital loss. Our article on why your own keys matter covers backup options.