Most people don’t know this… But there’s a way to turn losses on your crypto holdings into immediate tax savings – while keeping possession of your crypto.

It involves a loophole under Section 1091 of the IRS code. It’s known as the “wash-sale” rule.

A wash sale is when an investor sells a security at a loss to claim a tax write-off… only to repurchase the same (or nearly identical) security within 30 days of the sale.

The IRS prohibits such sales…

However, its rules don’t cover cryptos, which are treated as “property.”

This means they’re not subject to a holding period for tax-swap sales.

So if you’re sitting on losses on individual cryptos, you may want to take advantage of this loophole before the end of the year.

And I’ll show you how. But first…

How to “Wash Sale” Your Cryptos

I wanted to find out why conducting a wash sale now would be good for crypto owners.

So I spoke to Shehan Chandrasekera, head of tax strategy at CoinTracker. It uses software to track crypto portfolios… calculate capital gains and losses… and harvest tax losses with a click of a button.

Shehan is one of a handful of CPAs in the U.S. recognized as an expert on crypto taxation.

Here’s what he told me:

According to IRS Notice 2014-21 and the FAQs issued in 2019 by the IRS, cryptocurrencies are treated as property. Since cryptocurrencies are not treated like stocks and securities by the IRS, they are not subject to wash sales rules. This allows you to harvest tax losses without honoring the 30-day rule that stocks are subject to.

Many cryptos have been big winners this year. But if you’re a crypto enthusiast, you probably have some losers, too.

If you act quickly, you should be able to harvest your losses this tax year.

Here’s an example of how it works…

Say you purchased ether (ETH) at $1,200, and now it’s worth only $600.

In this hypothetical, you can sell your ETH before the end of the year to harvest $600 worth (per coin) of capital losses. And you could quickly get back into the same position at $600 per coin to maintain your position.

Since cryptocurrencies are treated as property, the asset class allows you to harvest tax losses more aggressively than stocks. (With stocks, you have to wait 30 days to buy back the same position. If you don’t wait, the IRS will disallow the loss for tax purposes.)

Keep in mind that there are various fees associated with transferring and trading crypto. So you’ll want to make sure these costs are less than what you’ll write off in taxes.

And if you don’t use up all your losses this year, you can roll them forward into future tax years. And if you don’t have an offsetting gain, you can still take up to a $3,000 loss in the current year.

Consider These Three Steps Before Acting

Remember, this information is for general tax purposes only.

And crypto is still somewhat of a “gray area” in terms of taxation. So we strongly encourage you to consult a tax professional before conducting a crypto tax swap.

But if you want to consider this strategy, here are some steps to help with the process:

  • Talk to your tax adviser: Tell them what you’re contemplating. Could you use some losses to offset gains on a one-for-one basis? There’s a chance your CPA may not even know this avenue exists.

  • Consult a tax consulting crypto firm: CoinTracker is one option. ZenLedger is another.

  • Know your situation: Before you reach out, know which cryptos you own, the quantity, the price you paid, your tax bracket, etc.

If you’re ready to make the swap after talking to your tax consultant, here’s a preview of what comes next…

This tax loophole allows you to benefit from falling crypto prices (in the past or the future). And you’ll still be able to keep the same cryptos you started with… just with a new cost basis.

Be sure to act before the end of the year if you want to use any losses for 2020.

And remember, you don’t have to wait for year-end to employ tax-loss harvesting. You can use this strategy to your benefit at any time of the year.



Grant Wasylik
Analyst, Palm Beach Daily

P.S. While the “wash sale” rule allows you to save money by writing off your crypto losses, most people don’t know there’s a way to generate income from your crypto assets, too.

They’re called Tech Royalties…

Tech Royalties is the name we’ve given to a subclass of crypto investments that pay you to hold them. They provide you with a steady stream of income that increases in value over time as the underlying cryptocurrency becomes more valuable.

Just like a musician makes more money from their royalties as their music becomes more popular.

What’s great about Tech Royalties is you get capital appreciation along with monster 10%-plus yields. So as bitcoin and other crypto explode in price, the income you generate will rise, too.

It may sound absurd, but some Tech Royalties have delivered yields of as much as 95%, 257%, 418%, 1,023%, and even 2,696%.

This new asset class is unlike any other in history. That’s why Teeka put together a presentation to show you how to start earning income from Tech Royalties. You can watch it right here