How to Write Off Crypto Losses and Reduce Your Crypto Taxes in 2026

The coin is down 60 percent, and you still hold it. That's not a write-off. You report a crypto loss when you sell, swap, or spend at a price below your cost basis. The trade goes on Form 8949, and the totals go on Schedule D. Net losses offset gains, then up to $3,000 of ordinary income, or $1,500 if married filing separately.

TokenTax puts proceeds, basis, and fees on the same lot so that $3,000 is not a guess.

To calculate a crypto capital loss, subtract your adjusted crypto cost basis from your net proceeds.

• Your cost basis is usually what you paid for the asset, including eligible acquisition fees.

• Your net proceeds are what you received when you sold, swapped, or otherwise disposed of the asset, reduced by eligible transaction costs tied to that disposal.

Pro tip
Our free crypto tax calculator is a good place to start. Bookmark it and use it any time.

Crypto capital loss example

• You purchase 1 ETH for $2,000 and pay a $20 buy fee. Your crypto cost basis is $2,020.

• A year and a day later, you then sell 1 ETH for $1,860 and pay a $10 sell fee. Your net proceeds are $1,860 − $10 = $1,850.

• Loss = Proceeds − Basis = $1,850 − $2,020 = −$170. You’ve realized a long-term capital loss.

What are short- and long-term capital gains and losses?

• Short-term crypto capital gains and losses: If you held a crypto asset for one year or less, the gain or loss is generally short-term. Net short-term gains are taxed at ordinary income tax rates.
  

• Long-term crypto capital gains and losses: If you held a crypto asset for more than one year, the gain or loss is generally long-term. Net long-term gains generally qualify for long-term capital gains rates.

To report crypto losses, list taxable sales, swaps, spends, and other capital-asset disposals on Form 8949 unless an IRS exception allows qualifying transactions to be reported directly on Schedule D. Form 8949 now has separate digital asset boxes: G, H, and I for short-term transactions and J, K, and L for long-term transactions. The correct box depends on whether you received Form 1099-DA or another statement and whether your basis was reported to the IRS.

Then total your short-term and long-term results and carry them to Schedule D. Keep exchange records, wallet history, CSV files, and transaction IDs so your return matches your records.

Can I use crypto losses for an income tax deduction?

Yes, possibly. If your capital losses exceed your capital gains for the year, you can deduct up to $3,000 of net capital loss against ordinary income, or $1,500 if married filing separately. Any remaining net capital loss can carry forward to future tax years.

How do I offset crypto capital gains with losses?

Losses are first used to offset gains of the same type (short- or long-term gains). If you have any losses left, they can be used to offset other types of gains. This order can affect your tax bill, especially in years with big price swings.

Do capital losses offset short-term or long-term capital gain?

• Short-term capital losses are used to reduce short-term capital gains first. Long-term losses reduce long-term gains first.

• Each can then be used to lower the opposite type of gain.

• Finally, any leftover net loss in either case can reduce ordinary income up to $3,000 this year, with any remainder carried forward.

Crypto tax-loss harvesting is simple. Sell assets at a loss before December 31st to use those losses on your taxes. This can help reduce taxes in a year with lots of gains or create losses you can use in future years.

Make sure your records are accurate so you get the full benefit. When in doubt, consult one of our crypto tax experts.

How to save money this tax season with simple crypto tax-loss harvesting strategies

Find crypto holdings worth less than what you paid and decide whether selling before year-end makes sense.

If you still want exposure after selling crypto at a loss, check whether the wash-sale rule applies before buying back in. Under current federal law, the rule applies to stock and securities, including digital assets that are themselves treated as stock or securities, such as certain tokenized securities.

Cryptocurrency that is not treated as stock or securities is generally outside the scope of IRC section 1091. ETF shares and other securities remain subject to the wash-sale rules, including the 30-day window.

Offset gains with crypto losses

You can use crypto losses to offset gains from crypto, stocks, and funds. This is a key part of tax planning for active investors.

Reality check: losses that do not count

Losses on crypto you still own do not count for taxes until you sell, trade, spend, or otherwise dispose of the asset.

Loss of access, theft of personal crypto wallets, and personal scams usually do not result in a simple capital loss. Some theft losses tied to a transaction entered into for profit may be deductible, but the rules are fact-specific and require strong documentation.

Keep transaction IDs, police reports, exchange records, recovery details, and any legal or insurance documentation.

Stolen coins and personal scams are a different rule. See crypto hacks and scams.

You must report taxable crypto transactions even if you do not receive Form 1099-DA or another information return. For 2026 sales, brokers generally report basis on Form 1099-DA for digital assets that qualify as covered securities, but basis can still be missing for noncovered assets. Keep your own exchange, wallet, cost-basis, date, amount, and fee records so you can report the correct gain or loss.

Which forms do you use to report crypto losses?

Most capital-asset crypto disposals are reported on Form 8949 and summarized on Schedule D. Some transactions for which a broker reported both proceeds and basis may qualify for direct Schedule D reporting if no Form 8949 adjustment is required. Keep prior-year Schedule D worksheets if you have capital-loss carryforwards.

Challenges of reporting your crypto tax losses on your tax return

Moving crypto between wallets can make it hard to track your cost basis on exchanges. Match deposits to withdrawals and assign costs to each new holding. For DeFi activity, you may need to check the blockchain to get the right fees and timestamps.

Form 1040 includes a digital asset question, so answer it carefully.

If you receive digital assets as payment for services, that income is generally taxable at fair market value when received. If you give digital assets as a gift, you may need to file Form 709. Receiving a bona fide crypto gift is generally not taxable when received, but large gifts from foreign persons can trigger separate Form 3520 reporting.

Pro tip
Go deeper into necessary crypto tax reporting in the US with our article that breaks down the common crypto tax forms.

Our platform combines purpose-built crypto tax software with an in-house team, so you can import, reconcile, and file with confidence. With TokenTax, you can:

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