Quick answer
Strategically realising crypto losses before year-end to reduce your overall capital gains tax bill.
Tax Filing
Australia
Canada
Germany
United Kingdom
United States
Loss Harvesting
Selling crypto at a loss to offset capital gains and reduce overall tax liability before year-end.
AustraliaCanadaGermanyUnited KingdomUnited StatesUnderstanding Loss Harvesting on crypto
Tax loss harvesting involves intentionally selling cryptocurrency that has declined in value to realise a capital loss. This loss can then be used to offset capital gains from other disposals, reducing your overall taxable gain for the year. Unlike the stock market, crypto is not subject to wash sale rules in most jurisdictions (though US applicability is debated), meaning you can repurchase the same asset immediately after selling. Effective loss harvesting requires careful tracking of unrealised positions and timing sales before the tax year closes.
Tax loss harvesting involves intentionally selling cryptocurrency that has declined in value to realise a capital loss. This loss can then be used to offset capital gains from other disposals, reducing your overall taxable gain for the year. Unlike the stock market, crypto is not subject to wash sale rules in most jurisdictions (though US applicability is debated), meaning you can repurchase the same asset immediately after selling. Effective loss harvesting requires careful tracking of unrealised positions and timing sales before the tax year closes.
What this means for your crypto activity
Losses offset gains
Capital losses can offset capital gains pound-for-pound or dollar-for-dollar, reducing your tax bill.
Carry forward excess losses
Excess losses beyond your gains can often be carried forward to future tax years.
US ordinary income offset
In the US, up to $3,000 of excess capital losses can offset ordinary income annually.
Wash sale rules debated
The wash sale rule does not currently apply to crypto in the US, but this may change.
Year-end timing
Timing matters — losses must be realised before the end of the tax year to count for that year.
- Capital losses can offset capital gains pound-for-pound or dollar-for-dollar, reducing your tax bill.
- Excess losses beyond your gains can often be carried forward to future tax years.
- In the US, up to $3,000 of excess capital losses can offset ordinary income annually.
- The wash sale rule does not currently apply to crypto in the US, but this may change.
- Timing matters — losses must be realised before the end of the tax year to count for that year.
Seeing it in action
Example scenario
James has £10,000 in realised capital gains from selling BTC. He also holds MATIC that is currently sitting at a £4,000 unrealised loss. By selling his MATIC before 5 April (UK tax year end), he realises the £4,000 loss, reducing his net taxable gain to £6,000 and saving approximately £960 in CGT at the 24% higher rate.
How this works across jurisdictions
- Australia
Capital losses can only offset capital gains — not ordinary income; excess losses carried forward indefinitely. The ATO explicitly enforces strict anti-abuse rules against crypto wash sales using a principles-based "intent" test. If a token is sold at a loss and repurchased shortly after with no genuine change in financial position, the ATO uses blockchain data-matching to deny the loss and apply up to 75% shortfall penalties.
- Canada
Capital losses can offset capital gains; net capital losses may be carried back 3 years or forward indefinitely. The CRA strictly enforces the 30-day "Superficial Loss Rule" on crypto assets. If you buy the exact same token within 30 days before or after the sale, your tax loss deduction is denied for the current year and added to the cost base (ACB) of the repurchased asset.
- Germany
Disposal within a 1-year holding period is taxable; after 1 year, gains are completely exempt. For short-term disposals (held under 12 months), the short-term tax-free limit is a strict €1,000 threshold (Freigrenze); exceeding this by even €1 makes the entire amount fully taxable at your progressive income rate.
- United Kingdom
Capital losses offset gains in the same year; excess losses carried forward indefinitely; must be claimed within 4 years. Note that realized losses now offset capital gains that are taxed at the higher 18% or 24% rates, maximizing the net value of harvested deductions.
- United States
Capital losses offset capital gains; up to $3,000 of excess losses deductible against ordinary income; remainder carried forward indefinitely. Under current law, federal IRC Section 1091 wash sale rules still do not explicitly apply to spot crypto since it is classified as property, allowing immediate repurchases—though new legislative frameworks like the bipartisan PARITY Act have been introduced to close this gap.
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