Navigating Crypto Losses on Your Tax Return: What You Need to Know


Among the companies that shook investors in the year 2022 were Celsius and FTX . The widely recognized provider of high profits on cryptocurrency savings accounts Celsius has declared bankruptcy due to a substantial balance sheet deficit . Popular trading site FTX has crashed and is currently being investigated for fraud . Significant losses suffered by investors in these platforms led to inquiries concerning the viability of loss cancellation on tax returns .


Claiming Losses: Insights from Tax Experts


With the frightening tax season investors are curious whether they can offset their crypto losses when filing their 2022 tax returns . Tax experts and accountants shed light on this matter . According to Director of the Tax Institute at H&R Block Andy Phillips investors who sold crypto at a loss in 2022 can claim those losses on their tax returns . They can fully offset or reduce their investment gains and in some cases write off up to $ 3,000 of ordinary income if losses remain . But it is important to note that losses can only be claimed if they have been realized through the sale of crypto .


Theft Losses: A Potential Tax Write-Off


In certain circumstances losses due to theft or criminal activities involving the invested funds may lead to a tax write-off . Taxpayers may be eligible for a deduction if the loss can be attributed to theft or criminal activity, provided legal action has been taken against the perpetrator . Nevertheless theft losses for income-producing property are complex and seeking guidance from a tax professional, as it is recommended by H&R Block, is crucial in such situations .


Crypto-Specific Tax Rules and Strategies


Eric Bronnenkant who is a financial advisor and accountant at Betterment points out some specific rules that regard crypto on tax returns . Crypto losses can be used to offset capital gains on various investments including stocks, bonds, mutual funds, ETFs and real estate . Unlike securities crypto is not subject to wash sales and allows investors to sell crypto at a loss, repurchase it within 30 days and still deduct the loss on their tax return . However future laws may eliminate this strategy as it draws attention from Congress .


Ensuring Accuracy and Maximizing Deductions


If you are unsure about writing off crypto losses or face frozen assets due to a crypto exchange’s bankruptcy proceedings asking for professional assistance is worthwhile . CPA and tax expert Lisa Greene-Lewis of TurboTax suggests ensuring correct cost basis for crypto and not forgetting any offsettable losses . TurboTax Premier software simplifies the process by allowing easy import of crypto information from exchanges and wallets . It helps users track unrealized capital losses from previous years which leads to a more favorable tax outcome .


In conclusion navigating crypto losses on your tax return requires understanding the rules and seeking expert assistance when it is deemed necessary . With proper organization, accurate reporting and knowledge of available deductions investors can optimize their tax outcomes and minimize the impact of their crypto losses .

You may be interested in:

Developers Discuss Rewriting Bitcoin Code Amidst Surge in BRC-20 Tokens

Bitpanda and Coinbase Forge Historic Partnership to Enhance Crypto Investment Safety

A New Era in Australia: First CBDC Transaction Is Made

Betty Ligmart

Content Editor Hello, my name is Betty, and I am a content editor. My passion lies in creating high-quality content that informs, engages, and inspires my readers. As a finance journalist, I cover a wide range of topics, including cryptocurrencies, which I believe have the potential to disrupt traditional financial systems. I strive to deliver accurate and insightful reporting that helps my readers navigate the complex world of finance. In addition to my work as a journalist, I'm also a content lead and editor, responsible for overseeing the creation of content across a variety of platforms. I enjoy working with writers and content creators to develop compelling stories that resonate with our audience.

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button