This transcript was generated from the episode audio and may contain minor errors.
If you invested in cryptocurrency like Bitcoin, you know, some other stuff 10 years ago, you're probably not listening to this podcast, okay, because you are a mega millionaire. Good work, way to go calling the trend. However, if you began investing in cryptocurrency in the spring of 2022, or maybe towards the tail end of 2021, you might be less than a mega millionaire. In fact, you might be sitting on some pretty significant losses. I'm doing that with some of my investments. Some of my investments are down 90%, which is not fun, you know?
Fortunately, I do try to diversify. But still, it's definitely a hit for a lot of us. You know, a lot of people are trying to figure out this year, do I keep my money in crypto? Do I take it out, take the loss? And in fact, that is what our caller is wondering about. Is there a bright
side? You know, can these losses be deducted from your taxes? Hmm. All right. It's probably not as good as, you know, buying Bitcoin at $2 and watching it go to $60,000. You know, and also,
I'm not a tax advisor. But because I wondered about this myself a few months ago, when I was trying to sort out my own situation, I do in fact, know the answer. So let's see, is there a bright side? Can you deduct your losses from Bitcoin or Ethereum or other cryptocurrency from your taxes? Detailed question, and my answer in just 30 seconds.
Hi, this is Dom calling in from Kennewick. I've been enjoying your show and your books. Like many people, I bought Bitcoin and some other cryptocurrencies last year. I mean, everyone was doing it and the price just kept going higher. But there was just one problem. I bought at the top
and then the market crashed. Yeah, oops. It seems like we're in a slow recovery now. But in the meantime, I'm sitting on a big loss, at least on paper. Now, can I deduct this on my taxes or otherwise see some kind of benefit? You know, you don't usually think of losing a lot of money as
a benefit, but just looking for any silver linings. Hey Dom, thanks for the question. Hope all is well in Washington state. All right, so listeners, of course, you know, please see your own tax advisor. Also, I'm speaking from a US experience here just because that's where I live and pay taxes. So some things could be different elsewhere. We have a global community. But to
kind of jump into the question, yes, there is a silver lining or at least there can be in terms of the tax deduction. There are some caveats though. So a couple things. Now, first of all, I think Dom knows this, but you have to actually sell your assets or realize the loss before you have an actual loss that can be deducted. You know, without a sale, it's just a paper loss, right? You've got this asset, you still own the token or the stock, you know, whatever the security
is, it's just that the price is less than what you paid for it. So it's a loss on paper, but you haven't actually realized that loss. So if you want to have the loss, you have to sell it. Next, if you have other capital gains, like from stocks or mutual funds, then you can offset those gains with any capital losses from crypto. So that can be helpful. Like if your mutual funds
are up, but then you lost money on crypto, you can actually kind of balance that out and avoid paying the tax on the stock profits or at least pay less tax. Also, if your overall capital gains position is negative after selling, in other words, like you don't have other profits to offset, then you can deduct a maximum of $3,000 on your tax return. So you got up to $3,000 you can deduct. However, any additional losses can be carried forward indefinitely. So if you lost a lot of money, like a lot of people did, then you can just keep carrying that forward year after year, basically a long term deduction. So lastly, you know, you could also just choose to sit tight and
say, well, that sucks that I, you know, bought at the top of the market, but I do still believe in Bitcoin or Ethereum or, you know, whatever your favorite coin is. So you could just choose to hopefully write it back up to the top. You know, so those are your options there. A little bit of a silver lining, of course, never find to buy at the top of the market. But I don't think cryptocurrency is going anywhere, right? So you always have to kind of think about that long term question as
well. Anyway, good luck. Good luck out there. I know people are kind of navigating lots of situations here. And listeners, if you've got a question or a situation or a business idea, a challenge, a good report, whatever it is, sidehustleschool.com/questions, let me know. We'll continue to
feature them to our global community. And thank you so much, global community. Thank you, listeners. You're awesome. You're amazing. New episode every day. My name is Chris Guillebeau. This is Side
Hustle School. From the Onward Project.
