Crushed by Bitcoin, Other Crypto Losses? Here Are Some Tax Tips, including on being scammed

tech.hindustantimes.com:

Investors in Bitcoin and other digital assets have been pummeled recently by the longest losing streak since 2011. If that’s you, you might be glad to hear that there are ways to ease some of the sting of those losses: Act promptly and you can cut your tax bill for next April and beyond.

The Internal Revenue Service allows taxpayers to use losses in stocks and other investments, including crypto, to offset gains. If your losses exceed your total gains for the year, you can deduct up to $3,000 against your taxable income. Losses beyond $3,000 can be carried forward every year until death to offset gains in future years.

Here’s the rub: You have to actually sell the investment to take the capital loss; it can’t just have dropped in value on paper.  But crypto investors get a special deal. Stock owners have to follow what’s called the wash-sale rule; if they sell a stock for a loss, they have to wait 30 days before buying the same security again, or else it won't be eligible for a deduction.

So far, the IRS hasn’t said that the wash-sale rule applies to digital assets. (There was a provision included in the Build Back Better Act that would have made crypto investments subject to the rule, but it fizzled.)

That means you can sell crypto that has fallen in value since you bought it, lock in the loss, and then turn around immediately and buy it back again. The move has its limits — the IRS knows crypto investors have been doing this for years and may be looking for a chance to recoup that revenue. To do so, the agency could turn to another part of the tax code that requires transactions to have 'economic substance' to be eligible for tax benefits, according to Matt Metras, an accountant in Rochester, New York, who represents