Realising Losses on Digital Asset Holdings in 2022
CBAP (CIBA), GTP (SAIT)
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Book a free exploratory callThis piece was originally published in 2022 and updated in May 2026. It captures the digital asset loss-realisation landscape as it stood at that time. Some developments described here have since evolved. For current guidance, see our comprehensive Crypto Tax Loss Harvesting Guide.
It is an ideal time to start thinking about loss realisation. The final countdown has begun, and 31 December 2022 can be seen waiting on the horizon.
The rollercoaster of digital assets has seen more downs than ups, and luckily, the chapter is coming to a close, but with the down, everyone needs a helping hand, especially regarding your tax bill.
Loss realisation is the one loss you would not want to avoid. Showing you that every situation has a silver lining, especially when we’re this sensitive to “losing” this year.
What is loss realisation?
Short and straightforward, it is strategy. Loss realisation will help you minimize the amount you owe in taxes. This can be done at any time during the year. Still, clever investors usually wait until the end of the year to be able to assess their portfolio, and they can evaluate what effect their performance had on their taxes.
Two options to consider in managing your taxes
- The losses can be used to offset investment gains.
U.S. taxpayers can use up to $3,000 of their investment losses against their taxable income. Keep in mind the loss can also be carried forward to the next tax return.
Married individuals filing separately will have an amount of $1,500 each available to them to offset against their taxable income. Also note, the loss will only be realized for tax if it is sold.
Why not sell and repurchase it right away, then?
This would be called a wash sale; you must leave a 30-day window when you are dealing with securities. You cannot sell your investment and repurchase it immediately or the same type of security; you will need to leave 30 days before repurchasing your investment. Otherwise, your loss will not count for tax purposes.
However, digital assets are seen as property in the US and not as a security. Therefore, the above rule does not apply.
It is essential to evaluate your portfolio to ensure you have not purchased the same security and make a mental note not to rebuy it before the time period elapses. Luckily, this is not the case with digital assets as of the publication date.
need a strategy in today’s markets, & “loss realisation” can help you preserve your investment portfolio & reduce the cost of capital gains tax, but it needs to be done before 31 December, 2022.
In the words of Winston Churchill, “He who fails to plan is planning to fail”.
When you sell it?
With digital assets is important to note that when you say sell you mean any disposal can trigger a loss.
The following events can constitute as a disposal:
- The sale of digital assets for fiat currency
- Trading digital assets for digital assets
- Expenditure of digital assets on goods and services
- Gift
Official Sources
- IRS: Topic 409, Capital Gains and Losses: the rules on capital losses, the annual offset against ordinary income and loss carryforwards.
- IRS: Publication 550 (Investment Income and Expenses): detailed guidance on investment losses and the wash sale rules.
- IRS: Publication 544 (Sales and Other Dispositions of Assets): how disposals of property are calculated and reported.
- IRS: About Form 8949: the form on which each realised gain or loss is listed.
- IRS: Digital Assets: the central IRS page confirming digital assets are treated as property.
Frequently Asked Questions
What is loss realisation?
It is a strategy for reducing the amount you owe in tax by realising losses in your portfolio. It can be done at any point in the year, though many investors wait until the end of the year so they can assess the whole portfolio first.
How much of a loss can be offset against income?
US taxpayers can use up to 3,000 dollars of investment losses against taxable income, and married individuals filing separately have 1,500 dollars each. Losses beyond that can be carried forward to the next tax return.
Do I have to sell for the loss to count?
Yes. The loss is only realised for tax purposes if the asset is sold. An unrealised decline in value does nothing for your tax position.
Does the wash sale rule apply to crypto?
The 30 day wash sale window applies to securities. Digital assets are treated as property in the US rather than as a security, so as at the publication date of this article that rule did not apply to them.
What counts as a disposal of a digital asset?
The sale of digital assets for fiat currency, trading one digital asset for another, spending digital assets on goods and services, and gifting them.
Master the topic: Crypto Tax-Loss Harvesting: How to Cut Your Tax Bill in 2026
Chris Herbst is the founder of CountDeFi, a crypto tax specialist whose qualifications span investment management, financial analysis, mathematical statistics and computer science. He holds the Chartered Business Accountant in Practice (CBAP) designation with the Chartered Institute for Business Accountants (CIBA) and the General Tax Practitioner (GTP) designation with the South African Institute of Taxation (SAIT). His combined background in investments, accounting and tax, mathematical statistics and computer science underpins his work in complex crypto tax reporting. This article is for educational purposes only and does not constitute tax, legal or investment advice. Consult a qualified tax professional for guidance specific to your situation. View our Editorial Policy.
