Hello abbielane,
Thank you for joining us today!
If you cash out/sell your crypto currency at a loss it is considered a capital loss.
If held for less then a year, it is considered a short term capital loss, over a year, a long term capital loss.
The transaction is reported on your personal tax return on schedule D.
If sold at loss, it will offset any other capital gains first, then your ordinary income
You are allowed to claim the loss up to $3000 per year until the full loss is used.
For example, if your loss in ($5000), and you don't have any other capital gains to offset it, you will reduce your ordinary income ($3000) in the year the transaction occurred, and carryover the remaining ($2000) to next year.
Here is a helpful article that provides more in depth explanations: Cryptocurrency Guide by TurboTax
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