Crypto Tax Deductions: Losses, Fees and What You Can Write Off

The crypto tax deductions that actually lower a US tax bill are fewer than many people hope, but they are worth using. Here is what qualifies: capital losses (unlimited against gains, plus $3,000 a year against other income), trading fees built into your cost basis and sale proceeds, scam losses where you had a profit motive, donations of appreciated crypto to charity, and genuine business expenses if you mine or trade as a business. Many write-offs people expect don’t qualify: tax software for investors, losses from personal theft, and simply “abandoning” a dead token.

Key takeaways

• Capital losses are the biggest crypto deduction. Unused losses carry forward indefinitely.
• Fees are rarely a separate deduction. They increase your basis or reduce your proceeds, which lowers your gain.
• Under IRS Chief Counsel Advice (CCA) 202511015, victims of investment-style scams may claim a theft loss. Victims of romance or other personal scams generally can’t.
• Selling a near-worthless token, even for a tiny amount, gives you a usable capital loss. Abandoning it generally gives you nothing for individual investors.
• Donating crypto held for more than a year can give a fair-market-value deduction with no capital gains tax, but you need a qualified appraisal above $5,000.

The crypto tax deductions at a glance

1. Capital losses and the carryforward

Every disposal of crypto, whether a sale, a swap or a purchase paid in crypto, produces a gain or a loss compared with your basis. Losses first offset gains of the same type (short-term against short-term, long-term against long-term), then the other type. If your net result is a loss, you can deduct up to $3,000 of it against wages and other ordinary income each year ($1,500 if married filing separately). Anything left over carries forward to future years with no expiry date. The Capital Loss Carryover Worksheet in the Schedule D instructions tracks it.

A practical point: losses you don’t realise don’t count. A coin that is down 80% in your wallet gives you no deduction until you dispose of it. Deliberately realising losses to offset gains is called tax-loss harvesting. Our crypto tax-loss harvesting guide covers the timing and the wash-sale question. In short, the wash-sale rule doesn’t currently apply to crypto. A House committee approved a bill in September 2026 that would extend it, but it had not become law at the time of writing.

2. Fees: built into your basis, not deducted separately

Investors can’t deduct exchange fees as a standalone expense. They reduce your gain instead:

• Buying: a $1,000 purchase with a $15 fee gives you a $1,015 basis.
• Selling: a $2,000 sale with a $20 fee gives you $1,980 of proceeds.
• Swaps: fees on a crypto-to-crypto trade are allocated across the disposal and the acquisition under the IRS’s broker regulations. Good tax software handles this automatically.

Network (gas) fees paid in crypto are technically a small disposal of the coin used to pay them. That can create tiny gains or losses. There is currently no de minimis exemption for them, although proposed legislation includes one. Other investor costs, such as crypto tax software, newsletters, hardware wallets and adviser fees, were “miscellaneous itemized deductions.” Those were suspended from 2018 and permanently eliminated by 2025 federal tax legislation, so investors can’t deduct them.

3. Theft and scam losses: the profit-motive test

Personal casualty and theft losses have been deductible only in narrow disaster situations since 2018, and 2025 legislation made that limit permanent. A theft loss from a transaction entered into for profit, under section 165(c)(2), is a different category and stays deductible. In CCA 202511015, released in March 2025, IRS lawyers applied this to five scam scenarios:

• Likely deductible: “pig-butchering” fake investment platforms, and scams where a fake “fraud department” persuaded the victim to move savings into a new account they believed would protect or grow the money, so the funds were moved for profit or investment purposes.
• Not deductible: romance scams and fake-kidnapping scams, where the victim sent money for personal reasons with no profit motive.

Conditions apply. The theft must be a crime under applicable law. You claim it in the year you discover it, reduced by any claim with a reasonable prospect of recovery, such as a pending lawsuit or a bankruptcy distribution. You also have to itemize deductions. The memo is non-precedential, but it shows the IRS’s current thinking. If you were defrauded, also report it to the FBI’s IC3 and keep every message and transaction hash. Our crypto scams guide explains the common patterns.

4. Worthless, delisted and rug-pulled tokens

In CCA 202302011 (2023), the IRS said a steep fall in a token’s value does not create a deduction by itself. A coin trading at a fraction of a cent is not “worthless” while it still has a market. The memo also treated abandoning a token as producing an ordinary loss that counts as a miscellaneous itemized deduction. Individuals can no longer claim those.

The practical route is to sell the token: on a DEX, on any exchange that still lists it, or to an unrelated buyer for a nominal amount. A real disposal turns the drop in value into a capital loss you can use. Keep the transaction record. For exchange collapses such as FTX, the timing of any loss usually depends on when recovery prospects become clear in bankruptcy. Get professional advice on the year to claim it.

5. Donating crypto to charity

Giving appreciated crypto directly to a qualified charity can be more tax-efficient than selling it and donating the cash:

• If you held the crypto for more than a year, you can generally deduct its fair market value and never pay tax on the gain.
• If you held it for a year or less, the deduction is limited to the lower of your basis and its fair market value.
• Gifts of appreciated property to public charities are generally limited to 30% of adjusted gross income, with a five-year carryforward for the excess.
• For donations claimed at more than $5,000, the IRS said in CCA 202302012 that you need a qualified appraisal. An exchange price screenshot isn’t enough. File Form 8283.

From the 2026 tax year, itemized charitable deductions only count to the extent they exceed 0.5% of AGI, under the 2025 federal tax law. That makes bunching larger gifts into one year more attractive. Giving crypto to family members is not a deduction. It is a gift, and the recipient takes over your basis.

6. Mining, validating and trading as a business

If you mine or validate as a genuine business (regular, continuous, aimed at profit), you report the activity on Schedule C and can deduct ordinary and necessary expenses: electricity, pool fees, hosting, repairs, a share of internet costs and possibly a home office. Mining hardware is depreciated, and under current federal rules qualifying equipment may be expensed through Section 179 or bonus depreciation. Net profit is subject to self-employment tax.

Hobby miners must still report the coins they mine as income, but they can’t deduct the hobby’s expenses. That makes business status valuable, and the IRS checks it carefully. Separately, “trader tax status” for active traders is hard to qualify for and doesn’t apply to most retail investors. Don’t claim it without advice.

For margin traders, interest on money borrowed to buy investments can be an itemized deduction on Form 4952, limited to your net investment income.

What you can’t write off

• Unrealised losses on coins you still hold.
• Crypto tax software, hardware wallets, courses or advisory fees, for investors.
• Coins lost through a forgotten password or a lost seed phrase. There is no theft, and usually no deductible casualty.
• Romance and other personal-motive scam losses, under the IRS’s current reading.
• Losses from transactions between you and a related party, which section 267 disallows.

Our crypto tax guide covers the basics of what is taxable, and our bitcoin guides hub collects related explainers. All figures and positions here are federal rules as of October 2026. They change, and state rules can differ, so confirm with a tax professional for significant amounts.

FAQ

Can I deduct crypto losses from my taxes?

Yes, once they are realised by a sale, swap or other disposal. Losses offset capital gains without limit. Any net loss beyond that offsets up to $3,000 of ordinary income per year ($1,500 if married filing separately). The remainder carries forward indefinitely. Coins that have fallen in value but are still in your wallet don’t produce a deduction until you dispose of them.

Are crypto exchange fees tax deductible?

Not as a separate deduction for investors. Purchase fees increase your cost basis and selling fees reduce your proceeds, so they still lower your taxable gain. Fees and expenses are separately deductible only if crypto activity is a genuine business reported on Schedule C, such as commercial mining.

Can I claim a tax deduction for crypto stolen in a scam?

Possibly. Under the IRS’s March 2025 Chief Counsel memo, losses from scams you entered for profit, such as fake investment platforms, can qualify as theft losses under section 165(c)(2) if you itemize. Losses from romance or impersonation scams with no profit motive generally don’t qualify. You claim in the year you discover the theft, reduced by any realistic recovery.

Is donating crypto better than selling it and donating cash?

Often, for appreciated coins held more than a year. You can generally deduct the full market value and never pay capital gains tax on the increase. If you sell first, you pay tax on the gain and then deduct only the cash you give. The benefit depends on itemizing. Larger gifts need a qualified appraisal and Form 8283.

Crypto is volatile and risky; this is education, not financial advice. Do your own research.