The Celsius bankruptcy continues to unfold, and in 2025 many creditors are finally seeing their crypto returned through the latest round of distributions. But here’s the catch: depending on how you reported your losses in past years, this payout could either save you thousands in taxes, or trigger a surprise tax bill.
At Gordon Tax, we’ve spent more than a decade guiding crypto investors through situations exactly like this. Let’s walk through what you need to know.
What Happened With Celsius?
When Celsius filed for bankruptcy in 2022, account holders lost access to their deposited crypto. After years of waiting, creditors are now receiving partial repayments, mostly in Bitcoin and Ethereum, through the bankruptcy process.
On the surface, this looks like good news. But the IRS cares about how you reported your Celsius loss back in 2022 or 2023. That reporting choice now determines whether today’s payout is taxable.
Scenario 1: You Did Not Claim a Loss Earlier
If you never claimed a loss when Celsius collapsed, the crypto you receive now is considered a return of your own property. That means:
- Your original cost basis carries forward into the Bitcoin or Ethereum you’re receiving.
- You won’t owe taxes until you sell the coins in the future.
Example:
- You deposited 5 BTC on Celsius in 2021 with a cost basis of $100,000.
- After bankruptcy, Celsius returns about 40%; so you receive 2 BTC in 2025.
- You allocate 40% of your $100,000 basis to those 2 BTC. Your new basis is $40,000.
- If you later sell the 2 BTC for $140,000, you’ll owe tax on a $100,000 long-term capital gain.
- Importantly, no tax is due in 2025 when you receive the payout.
Scenario 2: You Did Claim a Loss Earlier
If you already treated your Celsius holdings as a total loss in 2022 or 2023, things work differently. Since you’ve already taken the deduction, the IRS sees any repayment as new taxable income.
Example:
- You deducted a $100,000 loss in 2022.
- In 2025, Celsius pays you back 2 BTC worth $200,000.
- That $200,000 must be reported as taxable income in 2025; because you already claimed the loss.
This is where many investors will be caught off guard.
Why Prior Tax Returns Matter
The difference between these two outcomes is dramatic. One path delays tax until you sell, the other triggers taxable income immediately.
That’s why you must carefully review your 2022 and 2023 returns to see how you reported the Celsius collapse. Your documentation will be critical if the IRS ever questions your reporting.
How Gordon Tax Can Help
We specialize in crypto tax reporting and strategy. Our team can:
- Review your prior returns to determine whether your payout is income or a return of property.
- Allocate your cost basis correctly.
- Ensure you don’t pay more than you should.
If you just received your Celsius payout, or expect one soon, now is the time to act. Waiting until next tax season could create unnecessary headaches.
Final Thought
Celsius creditors have already been through a long and frustrating process. Don’t let tax reporting add another layer of stress. With the right strategy, you can protect yourself from surprise bills and keep more of what you’ve recovered.