Crypto Tax-Loss Harvesting Before December 31, 2026: Rules, Deadlines and the Wash-Sale Bill

Last updated: November 10, 2026. Covers sales made in tax year 2026 (returns due April 15, 2027).

Not tax advice: This article is general education based on IRS publications, IRS notices and public congressional records as of the date above. It is not tax, legal or financial advice and can’t account for your situation. For decisions that matter, talk to a CPA, enrolled agent or tax attorney.

The author is not a CPA or tax professional. Mbatia Muitungu has invested in crypto since 2018 and writes about it in plain English. Every rule below links to an official source, listed under Sources at the end.

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If you hold crypto that is worth less than you paid for it, selling it by December 31, 2026 turns that paper loss into a capital loss you can use on your 2026 federal return. The loss first cancels out capital gains, and up to $3,000 of any loss left over ($1,500 if married filing separately) can reduce your other income. Anything beyond that carries forward to future years.

That move is called tax-loss harvesting. This year it comes with two crypto-specific twists: a pending bill in Congress that could bring wash-sale rules to crypto retroactively, and an IRS relief period for choosing which coins you sell that ends on the same December 31 deadline.

Key takeaways

• A crypto loss only counts for 2026 if the sale or other disposal happens in 2026. A loss you are sitting on but haven’t sold does nothing for your return.
• Capital losses offset capital gains first. Up to $3,000 of net loss ($1,500 married filing separately) can then offset ordinary income, and the rest carries forward.
• Today the federal wash-sale rule in Internal Revenue Code section 1091 covers “stock or securities.” Congress’s own tax staff say digital assets are not expressly within its scope, and the IRS has issued no guidance applying it to crypto.
• H.R. 10357, the Digital Asset Tax Certainty Act, would extend wash-sale rules to most crypto sold after September 14, 2026. It cleared the Ways and Means Committee on September 16, 2026, but has not passed the House or Senate.
• IRS Notice 2026-20 lets you pick which units you sold (for example, your highest-cost coins) in your own records for coins held at a broker, but only through December 31, 2026.

How tax-loss harvesting works for crypto

The IRS treats crypto as property, so selling it, trading it for another coin or spending it is a taxable disposal. Your gain or loss is the difference between what you got (your proceeds) and your cost basis (generally what you paid, including fees).

If you sell a coin for less than its basis, you have a capital loss. The IRS rules for using that loss are the same ones that apply to stocks:

1. Sort by holding period. Coins held more than one year produce long-term gains or losses. Coins held one year or less produce short-term ones. The IRS counts from the day after you acquired the asset up to and including the day you disposed of it.
2. Net them. Short-term losses offset short-term gains, long-term losses offset long-term gains, and any net loss in one group then offsets net gain in the other.
3. Use the leftover. If you still have a net capital loss, you can deduct the lesser of $3,000 ($1,500 married filing separately) or your total net loss against other income.
4. Carry the rest forward. Unused loss carries to later years. IRS Publication 550 has the carryover worksheet.

Short-term gains are taxed at your ordinary income rates, so a loss that wipes out short-term gains usually saves more tax than one that offsets long-term gains.

Worked example (hypothetical numbers)

These figures are made up to show the math. They are not real prices or a recommendation.

Say that in 2026 you sold some SOL for a $1,000 short-term gain. You also bought ETH in February 2026 for $4,000, and in December it is worth $2,500.

	If you hold the ETH	If you sell the ETH by Dec 31
Short-term gain from SOL	$1,000	$1,000
Short-term loss from ETH	$0 (unrealized)	-$1,500
Net short-term result	$1,000 gain	$500 net loss
Effect on 2026 return	$1,000 taxed at ordinary rates	Gain fully offset; $500 deducted against other income

In the second column, the $500 net loss is within the $3,000 yearly limit, so all of it can be used in 2026 and nothing carries forward.

The wash-sale question in 2026

With stocks, the wash-sale rule stops you from claiming a loss if you buy the same or a “substantially identical” security within 30 days before or after the sale. Section 1091 applies to “stock or securities.” In its September 2026 description of H.R. 10357, the Joint Committee on Taxation wrote that digital assets are not expressly within the scope of section 1091 and that the IRS has not issued regulations or guidance on whether it applies to them.

That gap is why many crypto holders have sold at a loss and bought back right away. Here is what changed this fall:

• September 14, 2026: House Ways and Means Chairman Jason Smith introduced H.R. 10357, the Digital Asset Tax Certainty Act.
• September 16, 2026: The committee ordered it reported, 38 to 5. According to Congress.gov, that is still its latest action.
• What it would do: per the Joint Committee on Taxation, disallow a loss on a “traded digital asset” (other than a qualified US dollar stablecoin) if you acquire substantially identical assets within 30 days before or after the sale.
• When it would start: the committee version applies to dispositions after September 14, 2026. If it becomes law in that form, it would reach back to sales you already made this fall.

Nobody can tell you today whether the bill will pass, or in what form. If you want to avoid the risk, the simplest option is to wait more than 30 days before buying back the same coin, and not to buy it in the 30 days before you sell. If you plan to rebuy right away, discuss it with a tax professional first, and watch the bill’s page on Congress.gov.

Choose which coins you sell: the December 31 relief deadline

If you bought the same coin at several prices, which units you sell changes the size of your loss. Selling the units you paid the most for gives the biggest loss.

Under the regulations, for coins held with a broker (an exchange or other custodial platform) you normally have to tell the broker which units you are selling by the time of the sale. Otherwise they are treated as sold first-in, first-out (FIFO), oldest units first. Because many brokers weren’t ready to take those instructions, the IRS gave temporary relief in Notice 2025-7, and Notice 2026-20 extended that relief through December 31, 2026.

During the relief period, you can make the identification in your own books and records, no later than the date and time of the sale, by naming the units (for example, by purchase date and time or purchase price). You can also record a standing order in your records, such as “highest cost first,” before the sales it covers.

Example: picking lots (hypothetical numbers)

You bought 0.01 BTC three times on the same exchange: at $600, $1,100 and $900. In December you sell 0.01 BTC for $700.

• FIFO (the $600 lot): $100 gain.
• Highest cost (the $1,100 lot), identified in your records before the sale: $400 loss.

Write the identification down before you click Sell: date, time, asset, amount and which purchase lot. A spreadsheet entry or a note in your crypto tax software works if it shows when it was made. Starting in 2027, unless the IRS extends the relief again, you’ll need to give that instruction to the broker itself.

Year-end checklist

1. Pull your 2026 numbers now. Export transaction history from every exchange and wallet, and list gains already realized this year.
2. Find coins below cost basis. Check basis for coins you transferred in from another wallet. Exchanges often show no basis for those, and Form 1099-DA may not either.
3. Record your lot choice before each sale, as described above.
4. Sell by December 31. Leave a margin for exchange delays or holiday hours. Check the timestamp on the trade confirmation.
5. Decide on buybacks. Decide whether you’ll wait more than 30 days to rebuy, given the H.R. 10357 risk.
6. Save the records. Keep confirmations, your lot notes and your exchange CSVs for your 2026 return, Form 8949 and Schedule D.

What tax-loss harvesting won’t do

• It doesn’t make a bad investment good. You still lost the money. The tax benefit only softens the loss.
• It can raise future tax. If you rebuy, your new cost basis is lower, so a later sale may show a bigger gain.
• It doesn’t cover everything. Coins you sell inside an IRA or other tax-advantaged account follow different rules. Lost, stolen or worthless crypto raises separate questions, so get professional advice on those.
• State rules vary. This article covers federal rules only.

Where it goes on your return

Report each sale on Form 8949, carry the totals to Schedule D, and claim the allowed net loss on Form 1040. For 2026 sales, US brokers send Form 1099-DA, which includes cost basis only for “covered” coins bought in that account on or after January 1, 2026. Our Form 1099-DA explainer shows how to match the form to Form 8949, and the US crypto tax guide covers the full picture.

Crypto tax software can track basis across exchanges and wallets and generate Form 8949. If you use one, check that its lot method matches the identification you recorded.

Frequently asked questions

Is there a wash-sale rule for crypto in 2026?

Not under current law, according to the Joint Committee on Taxation’s description: section 1091 applies to stock and securities, and the IRS has issued no guidance applying it to digital assets. H.R. 10357 would change that for sales after September 14, 2026, if it is enacted in its committee form. As of November 10, 2026, it has not passed the House.

What is the deadline for crypto tax-loss harvesting?

The sale or other disposal must happen by December 31, 2026, to count for tax year 2026.

How much crypto loss can I deduct?

Losses offset capital gains without a cap. After that, up to $3,000 of net capital loss ($1,500 if married filing separately) can offset other income each year, and the rest carries forward.

Does swapping one coin for another count as a sale?

Yes. Trading one crypto for another is a disposal of the coin you give up, so it can realize a gain or a loss.

Do I have to tell my exchange which coins I’m selling?

Through December 31, 2026, Notice 2026-20 lets you identify units held at a broker in your own books and records instead. After that, unless the relief is extended, the identification generally has to be given to the broker, or FIFO applies.

Sources

Primary sources used for this article (links checked November 10, 2026):

• IRS: Topic no. 409, Capital gains and losses
• IRS: Publication 550, Investment Income and Expenses (capital loss carryover worksheet)
• IRS: Notice 2026-20, extension of temporary relief for identifying digital asset units
• IRS: Digital assets
• IRS: Instructions for Form 8949
• IRS: Instructions for Form 1099-DA
• US Code: 26 U.S.C. 1091, loss from wash sales of stock or securities
• Congress.gov: H.R. 10357, Digital Asset Tax Certainty Act: all actions
• Joint Committee on Taxation: Description of H.R. 10357 (September 2026)

Not tax, legal or financial advice. Crypto is volatile and you can lose all of it. Tax rules and pending legislation can change after this article was updated.