Disclaimer: This article is intended as an informative piece. This is not accounting or tax advice. Please speak to a qualified tax professional about your specific circumstances before acting upon any of the information in this article.
Crypto losses can reduce your taxable capital gains, and within limits your ordinary income too. Getting your transaction costs right also matters: eligible acquisition costs generally increase your cost basis, while disposal costs generally reduce the amount you are treated as receiving.
To see whether you can claim a loss on cryptocurrency you sold, there are a few steps to go through:
Determine your cost basis. In simple terms, this means figuring out how much you originally paid for your cryptocurrency in USD.
Add any eligible trading fees you paid when acquiring it, as these generally form part of your cost basis.
Deduct that final cost figure from the disposal proceeds (in USD) to get the gain or loss made on that disposal.
Combine the result with your other capital gains and losses for the year. The net capital gain or loss feeds into your wider federal tax calculation; it does not by itself determine whether you owe the IRS.
Pro-tip: one way to decrease your gains in a year is tax-loss harvesting. As of 2026, the federal wash sale rule generally does not apply to typical cryptocurrencies that are not treated as stock or securities, so selling and reacquiring crypto on the same day may still allow you to realize the loss while ending the day holding the same assets. It can apply to a digital asset that is itself treated as stock or a security, such as certain tokenized securities (see the IRS Form 1099-DA instructions), and Congress has proposed extending the rule to digital assets more than once, so check the status of the asset and the current law before relying on this.
If you end up with a net loss for the year, up to $3,000 of it ($1,500 if married filing separately) can be used to offset ordinary income, and anything above that carries forward to future tax years. We advise speaking to a qualified tax professional if this is your intention, as there are certain taxation caveats around this which are quite complex.
Working all of this out by hand is tedious. Recap automatically pulls in your transaction data from multiple exchange accounts and creates a tax report containing most of the information needed for your crypto tax filing.
Recap also uses end-to-end encryption, so all of this is done without us ever seeing or having access to your private financial data. If you would like to give Recap a try for free, click the button below.
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