Year-End Crypto Tax-Loss Harvesting: The US Rules as They Stand in 2026

Tax-loss harvesting means selling crypto that's worth less than you paid so the loss can offset gains, and up to $3,000 a year of ordinary income. As of October 2026, the federal wash-sale rule in Internal Revenue Code section 1091 is written for "stock or securities." The IRS treats crypto as property, and none of the IRS digital asset pages we checked mention wash sales. That's why crypto investors can often sell and rebuy without the 30-day wait stock investors face. It isn't a blank check, though, and the 2026 broker rules change how you pick which coins you're selling. Run your plan past a tax professional before you act.

This guide is general education, not tax advice. Your situation, your state and any law changes after October 2026 can change the answer.

How the loss actually helps you

The IRS rules on capital gains and losses, summarized in Tax Topic 409, work in this order:

1. Losses offset gains first. Short-term and long-term losses net against gains on your return.
2. Extra losses offset ordinary income up to $3,000 a year, or $1,500 if you're married filing separately.
3. Anything left carries forward to later years.

Holding period matters too. Crypto held more than one year produces long-term gains or losses. One year or less is short-term. Short-term and long-term results are netted in their own buckets first and taxed differently, so which bucket a loss lands in affects what it's worth.

Does the wash-sale rule apply to crypto?

Here's what we could verify from primary sources in October 2026:

• The statute: section 1091 disallows a loss on "stock or securities" if you buy substantially identical stock or securities within 30 days before or after the sale. The current text doesn't mention digital assets.
• The IRS position on crypto: the IRS says digital assets are treated as property, not currency.
• IRS guidance: the IRS digital assets page, its FAQs on digital asset transactions, and its capital gains tax topic don't address wash sales for crypto.

Put together, the common reading is that the wash-sale rule doesn't currently reach most crypto held directly, like bitcoin or ether in your exchange account or wallet. Tax law can change, so confirm nothing new has passed before you rely on this for a December sale.

Where it gets murky

• Crypto funds and ETFs. Shares of a bitcoin or ether exchange-traded fund are securities, so the wash-sale rule applies to them like any fund. Whether a fund and the coin it holds count as "substantially identical" to each other is unsettled. Don't mix the two in a harvesting plan without professional advice.
• Tokens that may be securities. Some tokens' legal status is disputed. If a token were treated as a security, section 1091 could apply.
• Trades with no real economic purpose. Ask your tax professional whether broader tax doctrines, such as economic substance, could affect a sell-and-instantly-rebuy pattern. They can tell you how much risk your specific plan carries.

The 2026 change most guides miss: lot selection

If you bought the same coin at different prices, the lot you sell decides how big your loss is. Selling your most expensive lot produces the largest loss.

Without a valid specific identification, the IRS default is that units leave the account in the order you acquired them, earliest first. In a rising market, those earliest units are often your cheapest, which is the opposite of what a harvester wants.

For 2025, you could note a standing order in your own records. For sales after 2025, the IRS digital asset FAQs say you have to make the identification with your broker, using the broker's tools, and a standing order must be set before the sale. If your broker only offers one method, that method counts as your standing order. If you plan to pick specific high-cost lots, check your exchange's cost-basis settings before you sell, not after.

Basis is also tracked separately for each wallet or account, a rule that took effect January 1, 2025. You can't sell coins on Kraken and claim the basis of coins sitting in a separate hardware wallet.

How to harvest losses step by step

1. Pull your full history from every exchange and wallet. You need purchase dates and prices per lot.
2. Total this year's realized gains, split into short-term and long-term.
3. Find positions below cost and note which specific lots are underwater.
4. Check holding periods. Selling a lot that's about to cross one year may turn a short-term loss into a long-term one, or the reverse.
5. Set your lot method with your broker if you want specific identification.
6. Count every fee. Trading fees and spreads eat into the benefit. On Kraken, for example, the simple buy and sell screen charges 1% plus spread, while Kraken Pro starts at 0.40% maker and 0.80% taker. Selling and rebuying costs you fees twice.
7. Sell before year-end and save confirmations for every trade.
8. Decide whether, and when, to rebuy. Then talk it through with your tax preparer.

Open a Kraken account

Costs and traps that shrink the benefit

• Fees both ways. A round trip through a 1% instant screen can cost 2% plus two spreads. Limit orders on a lower-fee interface cut that. Our guide to avoiding exchange fees covers the options.
• A lower basis going forward. If you rebuy, your new basis is the lower price. You've deferred tax, not erased it. When the coin recovers, the eventual gain is bigger.
• Resetting the holding period. Rebought coins start a new holding clock, so a future sale within a year is short-term.
• Price moves while you're out. If you wait before rebuying, the price can jump.
• Network fees. The IRS treats crypto spent on transaction fees as a disposition, so moving coins around creates tiny taxable events of its own.
• State taxes. State treatment varies. Ask your preparer.

When harvesting probably isn't worth it

• The loss is tiny. If round-trip fees and spreads eat most of a small loss, the trade mostly enriches the exchange.
• You have no gains and little income to offset. The loss still carries forward, but the benefit is pushed into future years.
• You can't document basis. If you don't know what you paid for the lot, you can't support the loss. Fix your records first.
• You plan to sell soon anyway at a gain. Rebuying at a lower basis just makes that later gain bigger. Harvesting tends to help most when you'd otherwise hold for a long time.
• Your coins are spread across many wallets. Basis is tracked per account, so moving coins together to sell them can create fees and record-keeping headaches. Sell where the lot already sits when you can.

Records to keep

For 2026 sales, your exchange's Form 1099-DA must show cost basis only for covered coins: bought after 2025 and held at that exchange until sale. Coins bought earlier, or transferred in, may show proceeds and no basis. Your own records fill the gap, and the IRS expects you to report every gain and loss whether or not a form arrives. Keep:

• Trade confirmations for each harvesting sale and any rebuy.
• The lot-identification method on file with each broker, with a screenshot of the setting.
• Records of transfers between your own accounts and wallets.
• Your loss carryforward amount from prior returns.

Our exchange tax reporting features comparison shows which platforms make these exports easy.

Trade on Kraken Pro

Your year-end checklist

• Confirm with a tax professional whether wash-sale rules or other doctrines affect your specific plan.
• Check whether any new law on crypto wash sales has passed since October 2026.
• Set your lot-identification method with each broker before selling.
• Price out fees for the full round trip, not just the sale.
• Keep fund or ETF positions out of the plan unless your advisor has signed off.
• Save every confirmation and export your full history after your last trade of the year.