Tax loss harvesting is selling an asset at a loss to offset capital gains realized elsewhere. Losses offset gains first, then up to $3,000 of ordinary income per year, with the rest carried forward indefinitely. In crypto it is unusually flexible because the wash-sale rule does not currently apply to coins held directly.
A harvested loss is the only tax deduction most crypto investors can create on demand. In a year with large realized gains, selling losing positions before December 31 can wipe out the tax bill, and because the position can be repurchased, the portfolio does not have to change. The work is in the details: choosing the right lot inside the right wallet, valuing it correctly, and keeping the repurchase defensible.
| Loss type | Offsets first | Then | Then |
|---|---|---|---|
| Short-term loss | Short-term gains (ordinary rates) | Long-term gains | $3,000 of ordinary income, remainder carries forward |
| Long-term loss | Long-term gains (0/15/20 percent) | Short-term gains | $3,000 of ordinary income, remainder carries forward |
You sell a coin that is worth less than you paid, realize the loss, and use it against gains from other sales. Because the wash-sale rule does not currently apply to crypto held directly, you can repurchase the position; confirm the law before relying on that.
Unlimited against capital gains. Beyond gains, up to $3,000 against ordinary income per year, with the rest carried forward indefinitely.
Under current law, yes, for coins held directly. For spot crypto ETFs the wash-sale rule applies and you must wait 31 days. Legislation to extend the rule to crypto is pending.
The sale must settle by December 31 of the tax year. Crypto settles immediately, so a December 31 sale counts; stock trades need to settle by year end.
Yes. The repurchased position starts a new holding period the day after you buy it back.
Harvesting well is a fall exercise: gains to date, losses available by lot and wallet, character matching, and a repurchase plan. Crypto tax planning at Gordon Tax produces a short written plan with the numbers, and the same reconciliation feeds the return in the spring.
Last reviewed September 17, 2026. Tax rules change; confirm current law before acting.
A confidential consultation. Tell us what you have, and we will tell you what applies and what it costs.
Hourly billing, estimated up front, with a deposit applied to the work.
Fill this out and we will reach out to schedule your consultation.
