The clock is ticking for crypto tax loss harvesting

The clock is ticking for crypto tax loss harvesting Investors might be able to take advantage of the recent crypto market downturn in order to lower their taxable income. Tax season is approaching, and with only a sliver of 2025 left, investors must now revisit tax and accounting strategies that support their overall financial health. In December, a slight adjustment can mean significant benefits. With crypto investing continuing to gain traction among retail investors over the past few years, crypto tax reporting and accompanying calculated tax strategies should not be overlooked. Much like the stock market, crypto markets can experience downturns, but at a much quicker pace. Recently, the crypto markets have experienced a slump, which is naturally causing investors to panic. Yet amid this broader market uncertainty lies a not-so-hidden opportunity: investors may be able to use these losses to their advantage for tax loss harvesting -a strategy to support lowering an individual’s taxable income. It allows investors to use losing positions to offset capital gains. While the discussion about tax loss harvesting at year-end is not novel or unique to crypto, the inherent complexities of digital assets, the rapid pace of crypto movement and the fragmentation across exchanges, wallets, and more add a layer of confusion about how best to approach this tax strategy. If you’re a crypto investor asking yourself how to approach crypto tax loss harvesting, below are key considerations and tips on how to navigate tax loss harvesting within the digital assets space. Identify your losses and review harvestable assets Before commencing tax loss harvesting, it is essential to have visibility into all relevant digital asset accounts and wallets. Next, individuals should look for assets that are currently trading below the cost basis (the amount paid for an investment or asset, plus any fees). In this step, an individual can determine which digital assets they can sell to generate a realized loss that offsets capital gains or reduces taxable income. When conducting a review, it is of the utmost importance to ensure that accounts are accurate, meaning that any and all cost basis are accurate. All calculations depend on the accuracy of the accounts, and a single error can limit the ability to measure gains and losses properly. Investors should not feel alone in navigating the identification process; some tools can help to identify which assets to sell and how much. Sell the assets Once the assets are identified, investors should act to liquidate them by either converting them to cash or swapping them for another cryptocurrency. This is where tax loss harvesting will be realized, as the sale that occurs is what activates the loss for tax purposes. Reinvest confidently If looking to maintain portfolio composition, any digital asset sold can be purchased right away to keep long-term investment plans on track. Unlike stocks, crypto does not have a wash sales rule, meaning there is no waiting period to buy back the same asset after it is sold. That said, this is not a...

Preview: ~500 words