If you’ve ridden the crypto wave this year, you’re down anywhere from 50-60%.
If you’re still holding on, then you want to take advantage of one particularly juicy loophole.
The wash sale rule (currently) doesn’t apply to crypto.
That’s because the IRS considers crypto to be property, NOT a security like a stock or a bond.
And the wash sale rule ONLY applies to securities, NOT property.
(Reminder: The wash sale rule is selling a security to realize the loss and buying it back within 30 days. If you do that, then your loss is disallowed. As in, it was a wash.)
Since it doesn’t apply to crypto, you can sell your Bitcoin et al, for a 60% loss and immediately buy it back.
You’ll get to keep the loss AND still own it when/if it rebounds.
The Caveats
1. This could change tomorrow – Biden tried to “fix” this loophole last year and the IRS is currently trying to figure out the rules around crypto. So even if you do it now while it’s allowed, they could take it back tomorrow
2. This doesn’t apply to crypto companies – If you don’t own cryptocurrency and instead invested in companies involved in the crypto space, then this doesn’t apply because those are securities.
This loophole only applies to actual cryptocurrency.
