Can I Deduct Cryptocurrency Losses?

If your cryptocurrency investments have lost value, there may be a silver lining when it comes to your taxes. The IRS treats cryptocurrency as property, which means when you sell it at a loss, you have a capital loss that can offset other capital gains. If your capital losses exceed your capital gains, you can deduct up to $3,000 of the remaining loss against ordinary income each year. Losses beyond that amount carry forward to future tax years. The key word is sell. You can only recognize a loss when you actually sell or exchange the cryptocurrency, not just because its value dropped while you are still holding it.