Crypto Tax-Loss Harvesting Calculator
Estimate your tax savings from strategically selling crypto assets at a loss to offset capital gains and ordinary income. Enter your unrealized losses, capital gains, income offset cap, and tax rate to see potential savings.
About this calculator
Tax-loss harvesting lets you realize losses on depreciated crypto assets to reduce your tax bill. The IRS allows realized losses to first offset capital gains dollar-for-dollar, and then offset up to $3,000 of ordinary income per year (the ordinaryIncomeOffset cap). The tax savings formula is: Savings = (min(unrealizedLosses, capitalGains) + min(max(0, unrealizedLosses − capitalGains), ordinaryIncomeOffset)) × (taxRate / 100). The first term captures gains fully sheltered by losses. The second term calculates how much of any remaining losses can offset ordinary income, capped at the legal limit. Any losses beyond both limits can typically be carried forward to future tax years. This strategy is legal but must be executed carefully to avoid the wash-sale rule.
How to use
You have $8,000 in unrealized crypto losses, $5,000 in capital gains, an ordinary income offset cap of $3,000, and a 30% tax rate. Step 1 — Losses offsetting gains: min($8,000, $5,000) = $5,000. Step 2 — Remaining losses: $8,000 − $5,000 = $3,000. Step 3 — Ordinary income offset: min(max(0, $3,000), $3,000) = $3,000. Step 4 — Total offset: $5,000 + $3,000 = $8,000. Step 5 — Tax savings: $8,000 × (30/100) = $2,400 saved.
Frequently asked questions
How does crypto tax-loss harvesting work and is it legal?
Tax-loss harvesting involves selling a cryptocurrency that has declined in value to realize the loss on paper, which can then offset taxable gains elsewhere in your portfolio. It is completely legal and is a standard tax-planning strategy used in both traditional investing and crypto. Unlike stocks, crypto is currently not subject to the wash-sale rule in the United States, meaning you can sell a token at a loss and repurchase it immediately without losing the tax deduction — though proposed legislation may change this. Always consult a tax professional to confirm current rules in your jurisdiction.
What is the $3,000 ordinary income offset rule for crypto losses?
Under U.S. tax law, if your capital losses exceed your capital gains in a given year, you can use up to $3,000 of the net loss to reduce your ordinary income — the income taxed at your regular marginal rate. This means a taxpayer in the 32% bracket saves up to $960 in federal taxes from this provision alone. Any losses beyond the $3,000 cap are not wasted; they carry forward to reduce gains or income in future tax years. The $3,000 limit applies to individuals; married couples filing jointly share the same $3,000 cap.
What is the wash-sale rule and does it apply to cryptocurrency?
The wash-sale rule is an IRS regulation that disallows a tax deduction when you sell a security at a loss and repurchase the same or a substantially identical security within 30 days before or after the sale. As of current U.S. tax law, the wash-sale rule applies to securities but the IRS classifies cryptocurrencies as property, not securities — meaning it technically does not apply to crypto today. This makes crypto tax-loss harvesting more flexible than stock-based harvesting. However, legislators have proposed bills to extend wash-sale rules to digital assets, so the landscape may change and ongoing legal advice is recommended.