We have just witnessed the roller coaster ride in the cryptocurrency market. While cryptocurrency values have plummeted more than 70% in a few months, this provides the opportunity to harvest losses, and offset future taxable income.
No Wash Sale Rules
According to guidance from the IRS, cryptocurrency is "property", not a "security", therefore, the wash sale rules do not apply. Investors who wish to harvest tax losses from the drops in the cryptocurrency market can do so without having to comply with the 30-day wash sale period. This means that cryptocurrency owners can sell the cryptocurrency at a loss, and then turn around and repurchase the identical cryptocurrency without having to wait 30 days to do so.
Congressional bills have proposed eliminating this strategy, but no law is currently in place.
With the recent downturn in virtual markets, we encourage you to contact your tax professional for a tax planning discussion.
