Crypto capital losses: netting and carryovers

A price fall is not automatically a realized loss

For an investment sale, compare the amount realized with the adjusted basis of the units disposed of. A lower market price on assets you still hold is an unrealized change. Theft, lost keys and insolvency require separate analysis.

Net the categories before estimating a benefit

Short-term and long-term capital results are netted under the Schedule D rules. If capital losses exceed capital gains, the ordinary-income deduction generally has a $3,000 limit, or $1,500 for married filing separately, with unused loss carried forward under the applicable rules. A deduction does not refund the entire loss.

Preserve the carryover trail

Keep the prior return and carryover worksheet along with the trade evidence. A tax app that starts this year may not know your earlier unused losses.

• Confirm the asset was held for investment.
• Reconcile disposals across every account.
• Check rules for the particular asset instead of assuming wash-sale treatment.
• Review recovered amounts and later insolvency payments.

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