Yes, because you entered this "swap scheme" with the intent to make a profit (as opposed to a personal gift or a romance scam), your loss may qualify as a theft loss in a transaction entered into for...
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Yes, because you entered this "swap scheme" with the intent to make a profit (as opposed to a personal gift or a romance scam), your loss may qualify as a theft loss in a transaction entered into for profit under Section 165(c)(2).
In March 2025, the IRS issued new guidance (CCA 202511015) specifically confirming that victims of crypto investment scams like fake swap platforms. can claim these as theft losses if they can prove a profit motive. The IRS is very strict about timing. You generally claim the theft loss in the year you discover it, but only if there's no reasonable prospect of recovery.
I will give you the steps for reporting this but keep in mind, you won't receive the deduction if you are taking the standard deduction. You must be able to itemize your deductions to take advantage of this.
Here are the exact steps to navigate TurboTax for your 2025 return:
1. Access the Correct Section
Sign in to TurboTax and open your return.
Click on the Federal tab (or "Federal Taxes").
Select Deductions & Credits.
Scroll down to the section titled Other Deductions and Credits (you may need to click "See all" or "Show more").
Find Casualties and Thefts and click Start or Revisit.
2. Enter the Event Details
TurboTax will ask if you were affected by a natural disaster. Select "No" (unless you are in a FEMA zone, but for this specific crypto scam, you are claiming it as an investment loss).
Description of Event: Enter something like "Crypto Investment Theft - Fake Swap Scheme."
Date Discovered: The date in 2025 when you realized the money was gone.
Property Type: Choose "Income-producing property" or "Investment property" (do NOT choose "Personal"). This is the critical step that allows the deduction despite the 2018–2025 restrictions.
3. Calculate the Loss Amount
Cost Basis: This is the amount of USD you originally spent to buy the crypto.
Example: If you bought 0.5 BTC for $2,000 and sent that BTC to the scammer, your basis is $2,000.
Fair Market Value (FMV) Before: Enter the value of the crypto at the time of the theft.
Fair Market Value (FMV) After: Enter $0.
Insurance/Reimbursement: Enter $0 (since you’ve confirmed you are not getting it back).
