I have crypto currency that I have kept for over a year, and it is worth less than I invested. If I cash out at a loss...

[abbielane]

I have crypto currency that I have kept for over a year, and it is worth less than my initial invested money. If I cash out at a loss, how does this work on my taxes? Is it still taxed? is it a write off? how does that work ?

[Holly W]

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 
 

[marctu]

@abbielane thank you for the question.  First, it is never good to lose money, so I am sorry to hear that you have an unrealized loss.

So, up to $3,000 per year in capital losses can be claimed in a tax year.  Losses exceeding $3,000 can be carried over to future tax returns for deduction against future capital gains taxes.  This carry over can be carried forward indefinitely. 

Be well and safe.

All the best,

Marc T.

TurboTax Live Select Time Tax Expert

26 Plus Years of Experience Helping Clients

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