Why you should report your 2022 crypto losses on your taxes (you can save a ton of money)

‘I don’t need to report crypto on my taxes because I didn’t take profits last year.’

I hear this pretty often both IRL and on Reddit, and it’s important to remember that this statement is a bit of an oversimplification.

It’s true that you don’t need to pay capital gains tax if you didn’t realize gains on crypto. However, reporting your cryptocurrency losses can help you save a ton of money in taxes.

(Disclaimer: I’m not a tax professional and you should do your own research before you sell your crypto/file your taxes. )

What’s the benefit of reporting crypto losses?

When you realize losses in crypto, you can offset capital gains from cryptocurrency, stocks, and other assets as well as up to $3,000 of income for the year! If you have a net loss for the year, you can even offset capital gains in future years.

Let’s say you lost $100,000 in 2022 (I really hope this didn’t happen to anyone reading this). In this case, you can write off $3,000 of income this year and carry forward $97,000 of loss to write off gains in future years! This can save you a HUGE amount in taxes if you end up taking profits during the next bull run.

What do you mean by ‘realized’ loss?

A ‘realized’ loss basically just means you disposed of your cryptocurrency for a lower price than it was when you originally acquired it.

Examples of disposals include selling your cryptocurrency, trading it for another crypto, or using your cryptocurrency to make a purchase.

If you just held your cryptocurrency for all of last year, you didn’t ‘realize’ a loss. Unfortunately, that means you can’t write off your loss on your tax return.

‘But, reporting my crypto losses sounds like way too much work!’

There’s no reason not to report your capital losses on your taxes. If you’re using a crypto tax platform (like CoinLedger, Koinly, CoinTracker, or whatever else is out there now), it should only take a few minutes. All you need to do is connect your wallets and exchanges and let the platform do the work for you.

TL;DR: Reporting your crypto losses can help you save money on your tax bill.