Crypto tax-loss harvesting means selling digital assets that are worth less than you paid so the realized loss can offset capital gains on your tax return. Under current federal law, the wash sale rule does not apply to crypto you hold directly, so a loss can generally be claimed even if you buy the same asset back right away. That could change. A digital asset tax bill advanced by the House Ways and Means Committee in September 2026 would apply wash sale rules to crypto sold after September 14, 2026, if it becomes law as written. Under current rules, a sale generally needs a trade date of December 31, 2026 or earlier to count for this tax year.
This guide explains how harvesting works, where the law stands today, what the pending bills would change, and how borrowing against Bitcoin compares to selling when someone needs cash at year end. It is meant to help you understand the landscape and have a more informed conversation with your tax advisor.
SALT is not a tax advisor or accountant, and nothing in this article is tax, legal, or accounting advice. Tax law in this area is actively changing. Confirm your situation with a qualified tax professional before selling, buying, or borrowing.
Key Takeaways
- Current law: the wash sale rule covers stock and securities. The IRS treats crypto held directly as property, so the rule does not currently apply to it.
- Bitcoin ETFs are different: spot Bitcoin ETF shares are securities, so the wash sale rule already applies to them.
- Pending change: the House bill would apply wash sale rules to crypto dispositions after September 14, 2026. The Senate bill would apply only after enactment. Neither is law yet.
- Deadline: trades must execute by December 31, 2026 to count for the 2026 tax year.
- Limits: net capital losses offset gains first, then up to $3,000 of ordinary income per year, with the rest carried forward indefinitely.
- Borrowing is not a sale: taking a loan against Bitcoin generally does not realize a gain, which can help you raise year-end cash without adding to your tax bill.
What Is Crypto Tax-Loss Harvesting?
Every time you sell, trade, or spend crypto, you realize a gain or loss equal to the difference between what you received and your cost basis. Gains add to your taxable income. Losses reduce it. Tax-loss harvesting is the practice of deliberately realizing losses before year end to offset gains you have already taken, or expect to take.
Assets held for more than one year produce long-term gains or losses, which are taxed at preferential rates of 0%, 15%, or 20% depending on income, plus the 3.8% net investment income tax for higher earners. Assets held one year or less produce short-term gains or losses, which are taxed at ordinary income rates. Because short-term gains are taxed more heavily, short-term losses are often the most valuable to harvest.
How Capital Losses Offset Gains
The netting process works in a set order. Short-term losses first offset short-term gains, and long-term losses first offset long-term gains. Any remaining net loss in one category then offsets net gain in the other. If you still have a net capital loss after that, you can deduct up to $3,000 of it against ordinary income ($1,500 if married filing separately) and carry the rest forward to future years with no expiration.
| Step | What Gets Netted |
|---|---|
| 1 | Short-term losses offset short-term gains. Long-term losses offset long-term gains. |
| 2 | A net loss in one category offsets a net gain in the other. |
| 3 | Up to $3,000 of any remaining net loss offsets ordinary income ($1,500 if married filing separately). |
| 4 | Any loss left over carries forward to future tax years with no expiration. |
All of this assumes the loss is allowed in the first place, which is where the wash sale question comes in.
Does the Wash Sale Rule Apply to Crypto in 2026?
Under current federal law, no. The wash sale rule in Section 1091 of the Internal Revenue Code disallows a loss when you sell stock or securities and buy substantially identical stock or securities within 30 days before or after the sale. The IRS treats directly held cryptocurrency as property rather than a security, so the rule has not applied to Bitcoin, Ether, or other coins held in a wallet or exchange account.
There is one important exception. Spot Bitcoin and Ether ETFs are securities, so the wash sale rule applies to them in full. Selling ETF shares at a loss and buying them back within 30 days disallows the loss, just as it would with a stock. Our guide on borrowing against a Bitcoin ETF versus spot BTC covers other ways the two are treated differently.
For general IRS guidance on reporting digital asset transactions, see the IRS digital assets page.
Pending Legislation That Could Change the Rules for 2026
Congress has proposed extending the wash sale rule to digital assets several times since 2021. In 2026 the effort moved further than before. On September 16, 2026, the House Ways and Means Committee advanced the Digital Asset Tax Certainty Act (H.R. 10357) on a 38 to 5 bipartisan vote. On September 30, Senator Steve Daines introduced the ADAPT Act in the Senate. Both would apply wash sale rules to most digital assets, with an exception for qualified U.S. dollar stablecoins, but they differ on timing.
| House Bill (H.R. 10357) | Senate Bill (ADAPT Act) | |
|---|---|---|
| Status as of early October 2026 | Passed committee, awaiting House floor vote | Introduced, referred to Senate Finance |
| Wash sale rule for crypto | Yes | Yes |
| When the wash sale rule would start | Dispositions after September 14, 2026 | Transactions after the bill becomes law |
| Grandfathering | None | Assets acquired before enactment not covered |
| Stablecoin exception | Qualified U.S. dollar stablecoins | Qualified U.S. dollar stablecoins |
Why this matters right now: if the House version became law as written, a crypto sale made after September 14, 2026 and repurchased within the 30-day window could have its loss disallowed, even though the trade was allowed under the rules in effect when you made it. The Senate version would not reach back that way. The two chambers would need to settle on one version, and a final bill could look different from either. Nobody can say yet whether a bill will pass this year, or which effective date would survive.
The uncertainty matters most for one common pattern: selling at a loss and buying the same asset back right away. Current law permits it. The House bill, if enacted as written, would not, and its effective date would reach sales already made this fall.
How Crypto Investors Commonly Approach Harvesting
Investors and their advisors generally weigh three patterns. None is right for everyone, and the choice depends on goals, risk tolerance, and how the legislation develops.
| Pattern | How It Works | What Investors Weigh |
|---|---|---|
| Sell and rebuy right away | Realize the loss and repurchase the same asset immediately. | Allowed under current law, but exposed if a wash sale rule is enacted with the House effective date. |
| Sell and wait more than 30 days | Realize the loss and stay out of that asset for longer than the 30-day wash sale window. | Aligns with how the rule works for stocks, but the investor is out of the position during the wait. |
| Sell and move on | Realize the loss on a position the investor no longer wants to own. | No repurchase question, but no future upside in that asset either. |
One detail in the House bill is worth knowing: it treats wrapped and tokenized versions of the same asset as substantially identical. Under that language, swapping BTC for a wrapped Bitcoin token would likely be treated the same as buying BTC back.
Key Dates and Reporting Rules for 2026
- December 31, 2026: the last trade date for a sale to count on a 2026 return. Exchange congestion and settlement delays are common around year end.
- Form 1099-DA: brokers began reporting gross proceeds from digital asset sales for 2025 and add cost basis for covered assets acquired in 2026 or later. Assets bought earlier or moved between platforms may show missing or incomplete basis.
- Wallet-by-wallet basis: since 2025, cost basis is tracked separately for each wallet or account rather than pooled across all of them.
- Lot identification: when the same asset was bought at different prices, which lots are treated as sold affects the size of the gain or loss. Platforms handle this differently.
- Form 8949 and Schedule D: where capital gains and losses from digital assets are reported.
Borrowing vs. Selling: Raising Cash Without Realizing Gains
Tax-loss harvesting deals with the positions that are down. Year end often brings the opposite question: what to do when you need cash for taxes, a purchase, or a business expense, and the assets you could sell are the ones that have gone up. Selling them creates new gains, which is the very thing harvesting is meant to offset.
A Bitcoin-backed loan is one alternative. Pledging BTC as collateral and receiving USD is generally not a taxable event, because nothing is sold. Here is how the two compare at a high level:
| Selling Bitcoin | Borrowing Against Bitcoin | |
|---|---|---|
| Taxable event | Yes, gain or loss is realized | Generally no |
| Bitcoin position | Reduced or gone | Kept, pledged as collateral |
| Holding period | Ends for the coins sold | Continues |
| Ongoing cost | None after the sale | Interest until the loan is repaid |
| Price risk | None on coins already sold | A falling BTC price raises loan-to-value and can lead to a margin call |
| Repayment | Not applicable | Principal is repaid at or before maturity |
Neither path is automatically better. Selling is simpler and removes price risk. Borrowing keeps your Bitcoin and avoids realizing a gain now, but it adds interest, repayment, and collateral risk. Lower loan-to-value (LTV) tiers leave more room for price swings. Our breakdown of borrowing versus selling Bitcoin for taxes goes deeper, and you can model loan size and collateral with the SALT loan calculator. Current pricing is on the Rates & Fees page. Business owners planning year-end equipment purchases may also want to read our guide to Section 179 and funding equipment with a Bitcoin-backed loan.
Questions to Ask Your Tax Advisor
If you are thinking about harvesting losses or raising cash at year end, these questions can help structure the conversation:
- How would the House and Senate wash sale proposals affect any sales I have already made this year?
- Do I have short-term or long-term gains this year, and which losses would offset them?
- Is my cost basis complete on every platform and wallet, including coins I transferred in?
- Would repurchasing an asset reset a holding period I care about?
- Do I hold any Bitcoin or Ether ETFs, including in an IRA, where the wash sale rule already applies?
- How does my state treat capital losses?
- If I need cash, how would borrowing against Bitcoin compare to selling in my specific situation?
See What You Could Borrow
If you are weighing whether to borrow against your Bitcoin instead of selling it, see how much you could borrow and what it would cost.
Frequently Asked Questions
Does the wash sale rule apply to Bitcoin in 2026?
Under current federal law, no. The wash sale rule applies to stock and securities, and directly held Bitcoin is treated as property. However, a House bill that passed committee in September 2026 would apply wash sale rules to crypto sold after September 14, 2026 if enacted as written, so the answer for 2026 could change.
Can I sell crypto at a loss and buy it back the same day?
Under current law, yes, and the loss is generally allowed. The open question for 2026 is the House bill, which would apply wash sale rules to crypto sales after September 14, 2026 if enacted as written. Under a 30-day wash sale window, repurchases made more than 30 days after the sale would fall outside the rule.
What is the deadline for crypto tax-loss harvesting in 2026?
Under current rules, a sale generally needs a trade date of December 31, 2026 or earlier to count on a 2026 tax return.
How much of a crypto loss can I deduct?
Capital losses offset capital gains without limit. If your losses exceed your gains, you can deduct up to $3,000 of the net loss against ordinary income each year ($1,500 if married filing separately) and carry any remaining loss forward to future years indefinitely.
Does the wash sale rule apply to Bitcoin ETFs?
Yes. Spot Bitcoin ETF shares are securities, so the wash sale rule applies to them today. A purchase of the same ETF within 30 days before or after a loss sale, in any of the taxpayer’s accounts including an IRA, generally disallows the loss.
Is borrowing against Bitcoin a taxable event?
Generally, no. Pledging Bitcoin as collateral and receiving loan proceeds is not a sale, so it does not realize a gain or loss. A taxable event can occur later if collateral is sold or liquidated, for example to repay the loan or satisfy a margin call.
Will Form 1099-DA show my crypto losses?
Form 1099-DA reports gross proceeds from sales on a broker platform, and for covered assets acquired in 2026 or later it also reports cost basis. For older or transferred assets, basis may be missing, so personal records may be needed to calculate the correct gain or loss.
Does tax-loss harvesting reset my holding period?
Yes, if you buy the asset back. The repurchased coins get a new cost basis and a new holding period starting on the purchase date, so they will need to be held more than one year before any gain qualifies as long-term.
This article is for informational and educational purposes only and does not constitute tax, legal, accounting, financial, or investment advice. Descriptions of current law and pending legislation reflect publicly available information as of October 2026. Pending bills may change, may not pass, or may take effect on different dates than described. Tax outcomes depend on your individual circumstances and state of residence. Consult a qualified tax professional before making decisions.
All examples are hypothetical illustrations, do not reflect any actual taxpayer or borrower, and are not a guarantee of future results or tax treatment. Rates for SALT products are subject to change and may vary based on loan amount, term, qualifications, jurisdiction, and collateral profile.
SALT loans are originated by SALT Lending LLC, NMLS 1711910. Loan products, terms, and features may not be available in all jurisdictions, and some jurisdictions are eligible for business loans only. See saltlending.com/map-list for current availability. SALT Loans are subject to jurisdictional limitations and other restrictions, and SALT does not offer loans to all prospective borrowers.
Borrowing against digital assets entails risk, including the risk of margin calls and liquidation of collateral, and may not be appropriate for your needs. Digital currency is not legal tender, is not backed by the United States or any other government, and SALT accounts are not subject to FDIC or SIPC protections.
