Crypto Loss Harvesting Calculator

Tax-loss harvesting converts a paper loss into a realized one so it can be netted against taxable gains. The arithmetic follows the ordering rules of Internal Revenue Code sections 1211 and 1212: realized capital losses first offset capital gains of the same character, short-term against short-term and long-term against long-term, then cross over to the other character, and only the residue reaches ordinary income. That residue is capped at 3,000 USD per year, or 1,500 USD for married filing separately, with everything above the cap carried forward indefinitely for individuals. The savings figure therefore has two distinct rates baked into it: gains offset are valued at the applicable capital gains rate, which is the ordinary rate for short-term holdings and 0, 15 or 20 percent for long-term holdings, while the 3,000 USD income offset is always valued at the marginal ordinary rate. That rate asymmetry explains why short-term losses are usually the more valuable ones to harvest. The main structural caveat is that harvesting defers rather than erases tax: repurchasing at the depressed price resets the basis downward, so the same appreciation is taxed later, and the benefit is the time value of the deferred payment plus any rate arbitrage. Crypto has historically escaped the section 1091 wash sale rule because that provision applies to stock and securities, not property, but proposals to extend it have appeared repeatedly in budget documents, so a 30-day waiting period is the conservative posture. Large carryforwards also age poorly: a 72,000 USD residue against a 3,000 USD annual cap takes roughly 24 years to absorb absent future gains.

The machinery this calculator applies is far older than cryptocurrency. Congress enacted the wash sale rule in the Revenue Act of 1921 to stop investors from booking losses on positions they never truly abandoned, and the modern 30-day window on either side of the sale sits in section 1091. The limit on deducting net capital losses against ordinary income was 1,000 USD for decades; the Tax Reform Act of 1976 raised it in stages to 2,000 USD for 1977 and 3,000 USD from 1978 onward, where it has stayed. Because the figure was never indexed to inflation, its real value has eroded by roughly a factor of five since it was set, which is why large crypto drawdowns produce carryforwards measured in decades rather than years. Crypto inherited these rules by classification rather than design. IRS Notice 2014-21 declared virtual currency to be property, which pulled it into the capital gain and loss regime while leaving it outside the securities-specific wash sale provision. The practice became widespread after the drawdowns of 2018 and again in 2022, when the collapse of Terra in May and of FTX in November left retail investors holding enormous unrealized losses at a moment when many also had realized gains earlier in the same tax year. Portfolio-level harvesting tools built into crypto tax software followed that demand. Rev. Proc. 2024-28 then required taxpayers to track basis wallet by wallet from 1 January 2025, tightening the record-keeping that specific-lot harvesting depends on.