{"id":8469,"date":"2022-09-26T00:15:00","date_gmt":"2022-09-26T08:15:00","guid":{"rendered":"https:\/\/www.cultofmoney.com\/?p=8469"},"modified":"2022-09-25T11:54:08","modified_gmt":"2022-09-25T19:54:08","slug":"report-crypto-losses-on-your-taxes","status":"publish","type":"post","link":"https:\/\/www.cultofmoney.com\/report-crypto-losses-on-your-taxes\/","title":{"rendered":"How To Report Crypto Losses On Your Taxes"},"content":{"rendered":"

\"How<\/span><\/p>\n

When you invest in any asset, you run the risk of loss. While it can be frustrating to lose money on an investment, the government also provides you with a way to use it to offset some of the pain. <\/p>\n

Because the IRS views cryptocurrency as property, you can report crypto losses on your taxes \u2014 and even use them to offset gains elsewhere. You can even reduce your taxable income with the help of crypto losses.<\/p>\n

Let\u2019s take a look at how crypto losses work and how to report crypto losses on your taxes.<\/p>\n

What Are Considered Crypto Losses?<\/h2>\n

As you might expect, crypto losses are those that come when you lose money on your crypto investments. You might see losses when you buy cryptocurrencies or non-fungible tokens (NFTs). When you sell your digital assets for less than you bought them for, you realize losses.<\/p>\n

What is a Taxable Event?<\/h3>\n

In order to claim crypto losses, you need to have a taxable event related to your crypto assets. When you sell a crypto asset bought earlier, it\u2019s a taxable event. Additionally, you must report that as income if you were paid in crypto. However, when you sell a cryptocurrency coin, it\u2019s a taxable event, and you have to base the gain or loss on the coin’s market value when you received it. <\/p>\n

Realize, too, that converting one cryptocurrency to another is considered a taxable event. So, if you trade BTC for ETH, you must log it as a taxable event. You figure your gain or loss based on BTC’s value at the transaction’s time. Then, you have to determine the cost basis of the ETH you just bought. Down the road, selling the ETH or converting it to another cryptocurrency will be another taxable event.<\/p>\n

Anytime you receive, sell or convert a crypto asset, it\u2019s a separate taxable event. If your crypto portfolio is down, you can\u2019t claim the loss. Instead, you can only claim the loss after you \u201clock it in\u201d by selling or trading the asset for something else.<\/p>\n

How to Calculate Crypto Losses<\/h3>\n

Calculating crypto losses is fairly straightforward. You figure them out similarly to how you would determine other asset losses. You simply subtract your cost basis from your proceeds.<\/p>\n

For example, let\u2019s say you bought a single Bitcoin (BTC) for $42,000 earlier this year. Now, you sell it for $20,700. Your loss is $20,700 – $42,000 = -$21,300.<\/p>\n

You now have a $21,300 loss that you can use to offset gains elsewhere or to reduce your taxable income. <\/p>\n

Anytime you have a crypto loss, you need to list out the individual transaction and figure out the loss from each. This applies to NFTs as well. If you bought an NFT for $5,000 and sold it for $3,000, you have a loss of $2,000. That brings your total losses to $23,300 when combined with your cryptocurrency loss.<\/p>\n

Pay attention to your different losses, and make sure to keep track of your transactions.<\/p>\n

How to Use Crypto Losses<\/h3>\n

After calculating your crypto losses, you can then use them to reduce your overall tax bill. Here are the ways you can use crypto losses:<\/p>\n