What's the wash-sale rule for cryptocurrency?

The wash-sale rule in IRC Section 1091 typically doesn’t apply to crypto. When reporting your crypto transactions in 2026, you usually don’t need to worry about wash-sale restrictions.

Why doesn’t the wash-sale rule typically apply to crypto?

The IRS classifies virtual currency as property. This means crypto follows similar rules as stocks and bonds—you pay tax if you sell, exchange, spend, or convert crypto for more than it costs you, and deduct losses if you receive less than what you paid.

Unlike stocks and bonds, crypto isn't treated as a security for federal tax purposes, which is why the wash-sale rule generally doesn’t apply. Instead, crypto is taxed as property, similar to assets like precious metals.

Could the wash-sale rule apply to crypto in the future?

While wash-sale rules don't currently apply to crypto under existing IRS guidance, applicable tax laws and interpretations continue to evolve and could change in the future.

What happens when you sell crypto at a loss?

Cryptocurrency is volatile and prices change rapidly. Because the ‌wash-sale rule generally doesn't apply, you can sell coins during market declines to reduce losses and then quickly buy back those coins as prices bottom out. You can apply those losses against other capital gains to lower their taxability. In years where these losses aren’t deductible, they can be carried forward to offset future gains.

Crypto is taxed when you receive it as a business receipt or have a transaction where you sell or trade it.

Can the IRS impose “wash trading” penalties for crypto market manipulation?

Wash trading involves manipulating regulated markets through wash-sale practices. It's larger in scale than individual wash sales from a small investor. Although market regulatory agencies may dole out penalties for wash trading, the IRS doesn't penalize individual wash-sale transactions. 

Do I need to keep records of crypto sales for tax purposes?

Yes. You need to keep thorough and accurate records of your digital asset transactions. That means documenting the date and cost of crypto acquired and also the date and proceeds from its sale. You will receive a Form 1099-DA after the end of the year reporting your proceeds from digital asset transactions. You need to reconcile that with your own documentation to make sure you report the correct gain or loss from crypto transactions on your tax return.

How do I report crypto losses on my taxes?

You don’t report crypto losses specifically—you report any crypto sales, exchanges, or conversions. 

You don’t have to report digital asset transactions if you just bought and held on to the asset, or transferred it from one wallet to another. If you received a digital asset as payment for goods or services, mined it, or earned it through exchange award programs, that’s reported as income.

For more info on how to enter your crypto in TurboTax, see this article.