Shocking loophole open for cryptocurrency investors to escape losses

tech.hindustantimes.com:

There may be a silver lining for cryptocurrency investors selling at huge losses during the recent market turmoil: a tax loophole that lets people minimize what they’ll owe the government down the road. Unlike stocks and bonds, cryptocurrencies aren’t subject to federal rules that bar people from claiming deductions if they sell an asset at a loss and then buy an identical or similar asset within 30 days before or after the sale. That provides a unique opportunity for people suffering steep losses to sell and reap future tax savings, then buy more virtual tokens at cheaper prices, according to crypto tax filing software firms. 

“This is a great time to store your capital losses, because when you exit the market at a future date at a huge gain, you can use these losses,” said Shehan Chandrasekera, head of tax strategy at software provider CoinTracker. Chandrasekera, who goes by @TheCryptoCPA on Twitter, has posted extensively about the strategy that he calls a “tax loss harvest.”

After surging 60% in 2021 -- and touching an all time high of nearly $69,000 in November -- Bitcoin price has fallen 20% to under $37,000 this year. The impact of crypto’s January turmoil won’t show up on investor’s 2021 tax returns. However, thousands of crypto investors who piled into the asset class last year must account for those investments as they file their returns during the next few months. 

Investors who sold crypto at a loss and then purchased similar assets at a lower price -- a move that some refer to as wash sales -- are free to take advantage of the tax strategy, according to TaxBit, a crypto tax software company. Some Democrats tried the close the loophole in a roughly $2 trillion spending bill that failed late last year.

“Our