What to Know About Crypto Tax Loss Harvesting in 2025

Tax loss harvesting involves selling underperforming assets to realize capital losses. These losses offset taxable gains or reduce ordinary income, lowering your overall tax burden.

For example, if you earn $5,000 in gains from Bitcoin but sell Ethereum for a $3,000 loss, you’ll only owe taxes on $2,000 of gains.

How does crypto tax harvesting work?

Crypto tax harvesting means you:

• Sell crypto assets at a loss to realize capital losses.

• Use losses to offset capital gains from other investments.

• Deduct up to $3,000 of excess losses against ordinary income annually (US).

US taxpayers can carry excess losses forward to future years.

Calculate your crypto taxes with our free crypto tax calculator.

Here are steps to effectively tax loss harvest crypto:

1. Review your portfolio: Use platforms like TokenTax to identify assets with unrealized losses.

2. Sell depreciated assets: Sell assets with significant losses to realize capital losses.

3. Offset gains and reduce income: Use losses to reduce capital gains or deduct up to $3,000 of ordinary income.

4. Avoid wash sales: Although crypto isn’t subject to the wash sale rule, avoid repurchasing the same asset within 30 days.

Learn more about wash sale trading in crypto.

• Annual limit: You can offset up to $3,000 of ordinary income annually ($1,500 for married individuals filing separately).

• Carry-forward rule: Excess losses can be rolled over to future tax years.

• Wash sale rule: While it doesn’t currently apply to crypto for US taxpayers, legislation could change.

To minimize your crypto tax bill:

• Track losses throughout the year using tools like ours at TokenTax.

• Harvest losses during dips or year-end to offset gains.

• Consult a tax professional for tailored advice.

For more tax-saving strategies, see our article on how to reduce your crypto taxes.

To implement tax loss harvesting effectively:

• Identify losses: Focus on underperforming assets in your portfolio.

• Sell strategically: Prioritize short-term losses, which offset higher-taxed short-term gains.

• Plan reinvestments: Avoid repurchasing the same asset within 30 days to mitigate future IRS risks.

Crypto tax loss harvesting timing

The two main opportunities to harvest crypto losses are:

• Year-end: Harvest losses before December 31 to apply to the current tax year.

• During market dips: Take advantage of price declines to maximize loss harvesting.

Crypto tax loss harvesting comes with unique challenges. Here’s a quick breakdown of what to look out for.

• Volatility: Crypto prices fluctuate significantly.

• Tracking: Varying purchase prices (cost basis) and holding periods complicate calculations.

• Regulations: Future IRS rulings could impact strategies like wash sales.

When in doubt, consult a crypto tax professional for further guidance.

How do I handle short- vs. long-term gains when tax-loss harvesting?

Prioritize harvesting losses from short-term holdings first, as short-term gains are taxed at higher ordinary income rates. Long-term gains receive more favorable tax rates.

Tax loss harvesting with NFTs

Tax loss harvesting works similarly for NFTs:

• Sell NFTs at a loss to offset capital gains.

• Be mindful of challenges like estimating fair market value and low liquidity.

Learn more in our NFT tax guide.

What if I have unrealized losses and gains for a single cryptocurrency?

Sell specific units (tax lots) of a given crypto to realize losses while retaining overall exposure. Platforms like ours at TokenTax allow you to identify the right lots to sell.

Tax-loss harvesting with unrealized gains and losses of the same crypto

If you own multiple tax lots of a cryptocurrency, sell the units with the largest unrealized losses to maximize tax savings while minimizing gains.

The benefits of tax loss harvesting include:

• Lower taxes: Offset gains and reduce taxable income.

• Long-term savings: Carry forward excess losses to future tax years.

• Portfolio management: Rebalance your portfolio while optimizing taxes.

Consider these drawbacks before harvesting losses:

• Lost future gains: Selling may mean missing potential price recoveries.

• Lower cost basis: Realized losses reduce cost basis, leading to higher future gains.

• Regulatory risk: Future IRS changes could impose wash sale rules on crypto.

Lowering the crypto cost basis

Realizing losses reduces your cost basis, which can increase future taxable gains if the asset recovers.

Calculate your crypto gains with our free crypto profit calculator.

Crypto wash sales

While the wash sale rule does not currently apply to crypto for US taxpayers, legislation may close this loophole. Avoid repurchasing the same asset within 30 days to limit risk.

Guide to crypto tax loss harvesting FAQs

Is there a limit to tax-loss harvesting?

Yes. US taxpayers can offset up to $3,000 of ordinary income annually with excess losses carrying forward.

What is the tax-loss harvesting rule for 30 day crypto?

Crypto is currently exempt from the 30-day wash sale rule in the US, but this may change. This rule may vary internationally, so always do your own research and understand the tax laws in your region.

How often should I harvest my losses?

You can harvest losses periodically during dips or at year-end for optimal tax benefits.

What’s the deadline for tax-loss harvesting?

The deadline is December 31 to apply tax loss harvesting for the current tax year.

Is tax-loss harvesting legal?

Yes. Tax loss harvesting is a legal strategy to minimize tax liability.

How do you tax loss harvest on Coinbase?

Export your Coinbase transaction history, identify assets with unrealized losses, and sell those assets strategically.

Does tax loss harvesting actually save money?

Yes. By offsetting gains and reducing taxable income, tax loss harvesting can result in significant tax savings.

Can tax-loss harvesting apply to all cryptocurrencies?

Yes. Tax loss harvesting applies to Bitcoin, Ethereum, NFTs, and other crypto assets classified as capital property.

What documentation is required for tax-loss harvesting?

Maintain detailed records of purchase dates, sale dates, amounts, and cost basis for all transactions.

How does the wash-sale rule affect crypto tax-loss harvesting?

Currently, the wash sale rule does not apply to crypto, but this could change. Avoid buying back the same asset within 30 days to prevent potential issues.