Before you can claim crypto losses on your taxes, it’s important to understand how cryptocurrencies are taxed.
In the eyes of the IRS, cryptocurrency is considered property, and any gains or losses from its sale or exchange are treated as capital gains or losses.
If you sell cryptocurrency for less than you paid for it, that results in a capital loss.
These losses can be used to offset any capital gains you might have from other assets, which might lower your overall tax burden.
To claim crypto losses on your taxes, you’ll need to have accurate records of your transactions.
This means keeping track of when you bought and sold cryptocurrencies, the amounts involved, and the prices at which you bought and sold.
It’s also essential to keep records of any fees you paid for transactions, as these can be deducted from your taxes as well.
Keeping accurate records can help ensure that you properly report any gains or losses and avoid any potential penalties or audits.