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Crypto Losses: The $3,000 Limit and Carryover

Short answer: IRS Topic 409 says that if your capital losses exceed your capital gains, you can claim the lesser of $3,000 ($1,500 if married filing separately) or your total net loss (Schedule D, line 16) to lower your income, on line 7a of Form 1040. Any excess net capital loss can be carried forward to later years. The IRS Digital assets page says digital assets are property, so gains and losses on sales or exchanges of crypto you hold as a capital asset are capital gains and losses (Form 8949).

Short-term vs long-term

Held one year or less = short-term; held more than one year = long-term. You generally count from the day after you acquired the asset up to and including the day you disposed of it (Topic 409). Net short-term gains are taxed as ordinary income. Net capital gains can be taxed at lower rates; for taxable years beginning in 2025, the IRS gives 0% up to $48,350 single ($96,700 joint, $64,750 head of household) and 15% above that up to $533,400 single ($600,050 joint, $566,700 head of household), then 20%. The 2026 thresholds were not read.

Made-up example

Crypto sales: a $5,000 gain and a $9,000 loss, no other gains or losses. Net loss $4,000; you can use $3,000 against other income this year and carry forward $1,000.

What the pages don't tell you

Losses from personal-use property aren't deductible (Topic 409). The wash-sale rule and crypto: see wash sale rule. The IRS Digital assets page lists Chief Counsel Advice 202302011 on section 165 for crypto that has declined in value; we did not read it.

Reporting

Report each disposal on Form 8949 and total on Schedule D; use the Capital Loss Carryover Worksheet in Pub. 550 or the Schedule D instructions for the carryover (Topic 409).

Related

1099-DA vs Form 8949 · Wrong cost basis on 1099-DA

FAQ

Do I have to sell to claim a loss? The pages we read don't treat unrealized losses; Topic 409 speaks of losses from sales.

Does a stolen coin give a loss? Not covered here.

What we could not verify

• Capital gains rate thresholds for 2026 (the Topic 409 text read gives 2025 amounts).
• Worthless, stolen or hacked crypto (CCA 202302011 not read).
• The mechanics of the carryover worksheet (Pub. 550 not read).
• Net investment income tax and state tax on gains.

Sources (official)

• IRS, Topic no. 409, Capital gains and losses (page last reviewed or updated September 24, 2026) — https://www.irs.gov/taxtopics/tc409 (read October 17, 2026)
• IRS, Digital assets (page last reviewed or updated September 2, 2026) — https://www.irs.gov/filing/digital-assets (read in full October 17, 2026)

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Not tax advice. Examples use made-up figures. Nothing here has been reviewed by a tax professional. We may earn commissions from affiliate links where marked; see the disclosure.