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May 28, 2021
Last week the crypto markets plunged, with major cryptocurrencies losing over half their value when compared to their recent highs. But savvy investors could leverage those losses for tax benefits, due to the fact that cryptocurrencies aren’t subject to the SEC’s “wash sale rule,” as reported by CNBC.
The Wash Sale Rules
A “wash sale” occurs when an investor sells a security at a loss, then buys back the same security or a substantially similar one within 30 days, per the SEC website.
Although investors can usually deduct capital losses, that’s not allowed for losses related to wash sales. In fact, wash sales can even incur penalties.
Bitcoin, ethereum, dogecoin and other cryptocurrencies have seen prices plunge in recent weeks.
These investors can leverage those losses in a way that a typical stock or mutual fund investor canât.
Thatâs because the so-called wash sale rules donât apply to crypto, according to financial advisors. But there are important caveats.
Crypto investors may be shellshocked by a recent plunge in prices. But that sell-off has a silver lining: It opens the door to a money saving tax strategy.
Popular cryptocurrencies like bitcoin and ethereum shed more than half their value in volatile trading over the past month or so.