TAX SEASON 2024
Tax season 2024: Can you report crypto losses on your taxes?
Crypto losses or gains are reported on your personal tax form like any other capital gains tax, including options to offset a tax liability.
Cryptocurrency investors, like any other investor, must accurately report their transactions to the Internal Revenue Service (IRS). While the crypto market offers lucrative opportunities, it also comes with tax obligations that can’t be ignored. One crucial aspect of crypto taxation is reporting losses incurred from the sale or exchange of cryptocurrencies, which can help offset capital gains and reduce tax liabilities.
Breaking down cryptocurrencies and the tax system
Cryptocurrency transactions are treated as taxable events by the IRS. This means that buying, selling, trading, or even using crypto to purchase goods and services will have tax implications.
First and foremost, investors need to calculate their crypto losses accurately. This involves tracking all transactions involving cryptocurrencies, including purchases, sales, trades, and disposals. Detailed records should be maintained, documenting dates of acquisition and disposal, purchase prices, sales prices, and any associated transaction fees.
Once losses have been calculated, they must be reported on the investor’s tax return. Crypto losses are reported on Schedule D (Form 1040), which is used to report capital gains and losses from investments. Losses can be used to offset capital gains from other investments, such as stocks, bonds, or real estate. Additionally, up to $3,000 of excess losses ($1,500 if married filing separately) or your total net loss shown on line 16 of Schedule D form can be used to offset other taxes, with any remaining losses carried forward to future tax years.
What are the capital gains tax rates for 2024?
| Taxable Income | Capital Gains Rate |
|---|---|
| Less than or equal to $44,625 (Single and Married Filing Separately) | 0% |
| Less than or equal to $89,250 (Married Filing Jointly and Qualifying Surviving Spouse) | 0% |
| Less than or equal to $59,750 (Head of Household) | 0% |
| More than $44,625 but less than or equal to $492,300 (Single) | 15% |
| More than $44,625 but less than or equal to $276,900 (Married Filing Separately) | 15% |
| More than $89,250 but less than or equal to $553,850 (Married Filing Jointly and Qualifying Surviving Spouse) | 15% |
| More than $59,750 but less than or equal to $523,050 (Head of Household) | 15% |
However, a capital gains rate of 20% applies to the extent that your taxable income exceeds the thresholds set for the 15% capital gain rate.