Crypto Tax-Loss Harvesting: How It Works in the US, UK and Canada
Tax-loss harvesting means deliberately selling an investment at a loss to offset taxable gains. Crypto's volatility creates plenty of opportunities, but the rules differ between countries, and getting them wrong can mean the loss is denied.
The basic idea
Suppose you realized a $10,000 gain on Bitcoin this year. You also hold an altcoin bought for $6,000 that is now worth $2,000. Selling the altcoin realizes a $4,000 loss, which offsets part of your gain. You now pay tax on $6,000 instead of $10,000.
| Without harvesting | With harvesting | |
|---|---|---|
| Realized gains | $10,000 | $10,000 |
| Realized losses | $0 | −$4,000 |
| Net taxable gain | $10,000 | $6,000 |
| Tax at 15% | $1,500 | $900 |
The loss already existed. Harvesting simply makes it count this year.
Run your own numbers with the free calculator: Crypto Tax Calculator
Open calculator →United States
- Capital losses offset capital gains first.
- Excess losses offset up to $3,000 of ordinary income per year ($1,500 if married filing separately).
- Unused losses carry forward indefinitely.
- Wash sales: the wash sale rule bars claiming a loss on stocks and securities repurchased within 30 days. As of 2026, the IRS treats crypto as property rather than a security, so the rule has not generally applied to crypto — though Congress has proposed extending it. Check the current rules before relying on this, and be aware that the IRS can challenge transactions that lack economic substance.
United Kingdom
- Losses offset gains in the same tax year before the £3,000 annual exempt amount is applied.
- Unused losses carry forward if reported to HMRC within four years.
- The 30-day rule: if you sell tokens and buy the same type of token within the next 30 days, the sale is matched with the new purchase rather than your pool. This usually wipes out the loss you were trying to create. To harvest a loss, you must stay out of that token for more than 30 days — or buy a different asset.
Canada
- Allowable capital losses (50% of the loss) offset taxable capital gains.
- Net capital losses can be carried back three years or forward indefinitely.
- Superficial loss rule: if you or an affiliated person buy the identical property within 30 days before or after the sale and still hold it 30 days later, the loss is denied and added to the cost base of the new units.
Strategies investors use
- Review positions before year-end. In the US and Canada the tax year ends 31 December; in the UK it ends 5 April.
- Harvest against short-term gains first in the US, since they are taxed at higher rates.
- Swap to a similar but not identical asset where the rules require, keeping market exposure while realizing the loss. Be cautious: whether two assets are "identical" can be a judgment call.
- Keep the records. Document the date, quantity, cost and proceeds of each harvested sale.
Mistakes to avoid
- Selling a good long-term holding only for tax reasons when transaction fees and spread exceed the tax saved.
- Forgetting that a lower cost basis means a larger gain later — harvesting often defers tax rather than eliminating it.
- Buying back within the restricted window in the UK or Canada.
- Ignoring state or provincial tax effects.
Model the saving
Run your gain through the crypto tax calculator, then reduce it by the loss you plan to harvest to see the difference in tax. Confirm your plan with a tax professional before year-end.
CryptoMathly provides educational estimates only and is not financial, investment or tax advice. Crypto assets are volatile and you can lose money. Always verify figures with a qualified professional.