Crypto Losses Can Offset Income And Capital Gains

After a Tough Year for Crypto, Here's How to Handle Losses on Your Tax Return

Crypto Losses Can Offset Income and Capital Gains

If you sold cryptocurrency at a loss in 2022, you may be able to deduct those losses on your tax return. The Internal Revenue Service (IRS) recently issued a Chief Counsel Advice Memorandum (CCA) that provides guidance on how to handle crypto losses.

Deductible Losses

According to the CCA, crypto losses can offset up to $3,000 of your regular income. They can also offset an unlimited amount of capital gains. This means that if you have capital gains from other investments, you can use your crypto losses to reduce the amount of taxes you owe.

Steps to Claim Losses

To claim crypto losses on your tax return, you must first calculate your net capital gain or loss. This is done by adding up your capital gains and losses from all of your investments, including crypto. If your net capital gain is positive, you can deduct up to $3,000 of your crypto losses against your regular income. If your net capital gain is negative, you can deduct the full amount of your crypto losses against your capital gains.

Additional Information

The IRS CCA also provides guidance on how to report crypto transactions on your tax return. You must report the date of each transaction, the amount of crypto purchased or sold, the price of the crypto at the time of the transaction, and the fees associated with the transaction.