Large Crypto Losses May Not Become Instant Tax Write-0ffs, But Here’s What You Can Do

Many investors are hoping that selling crypto at steep losses could yield large tax write-offs. That is not necessarily the case.

The recent crypto market downturn and the upcoming recession fears have led many investors to sell their cryptocurrency positions at huge losses thinking that such losses are"instant tax write-offs" on their taxes.

There are two types of capital losses: short-term capital losses & long-term capital losses. Short-term capital losses occur when you sell your coin/NFT after holding it forthan 12 months and below its cost. Long-term capital losses occur when you sell your coin/NFT after holding it forFor example, say Sam purchased 1 BTC at $60,000 on December 2021. On March 2022, he sold this BTC for $29,000.

Going with the example above, if Sam doesn't have any other capital gains in 2022, he can only deduct $3,000 of short-term capital loss in his 2022 taxes. Sam can carryforward the remaining $28,000 loss to future years. He can use this carried forward loss to offset future capital gains, if he has any.

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