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If you lost money in crypto, here's how you can get some back

Erin Arvedlund, The Philadelphia Inquirer on

Published in Home and Consumer News

If you lost money in cryptocurrency this year, there's a bit of good news. You can claim that loss on your taxes.

This year has been a period of massive losses, with the most popular currency, Bitcoin, trading at above $68,000 in November, then crashing to $22,900 this month.

The bear market in crypto erased $2 trillion in market value and led to several bankruptcies among crypto firms like Celsius, Voyager Digital and Three Arrows Capital, among others.

However, you can claim crypto losses and offset gains in your portfolio, say Philadelphia-area accounting experts.

Trading generates gains or losses every time you buy, sell, or even exchange virtual currencies.

That's because the Internal Revenue Service treats crypto as property, just like stocks or real estate, according to tax expert Elisabeth Felten, assistant professor of business at DeSales University.

 

Just like stocks, crypto sales and exchanges are reported on IRS forms 8949 and Schedule D, and are subject to the same limits, said Michael Gillen, head of tax accounting at Duane Morris in Philadelphia. That is, taxpayers are limited to a $3,000 capital loss, which you can use to offset other income, and losses greater than $3,000 can be carried forward indefinitely and used to offset income on future tax returns.

Crypto loophole

More good news for crypto investors: there's a loophole around what's called the "wash sale" rule.

The IRS prevents investors from selling stocks at a loss and immediately buying back the stock within 30 days. It's called the "wash sale" rule.

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