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

It’s common for first-time crypto taxpayers to wonder if crypto losses are tax-deductible. The simple answer is: yes, you can use realized crypto losses to offset capital gains and even income.

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?

• Short-term crypto capital gains: if you held a crypto asset for one year or less, the gain or loss is a short-term capital gain or loss and is taxed at regular income rates.

• Long-term crypto capital gains: If you held a crypto asset for more than a year, it's considered long-term and taxed at the going crypto capital gains rates.

To report crypto losses, list each taxable sale, swap, spend, or other disposal on Form 8949. Include the date acquired, date sold or disposed of, proceeds, cost basis, and gain or loss.

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, be careful before buying the same asset back right away. The wash-sale rules generally apply to stock and securities, including digital assets that are also stock or securities for tax purposes, such as tokenized securities.

Crypto is not currently treated the same way, but the rules are evolving, and a 31-day waiting period or a different asset may be the safer approach.

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.

Lost access, personal crypto wallet theft, and personal scams usually do not create 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.

You need to report every taxable crypto sale or trade, even if you do not get a crypto 1099 form. Many people wonder if they have to report crypto losses when no form arrives, and the answer is yes. Keep records of exchanges, wallets, and a primary ledger, including dates, amounts, and fees, to ensure your totals match.

Forms to claim your crypto losses

Fill out Form 8949 with details for each sale, swap, or spend. Add up your short- and long-term results, and transfer them to Schedule D. Keep any past-year worksheets if you have losses to carry forward.

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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