Does the Wash Sale Rule Apply to Cryptocurrency?

So, what’s the wash sale rule? And does it apply to cryptocurrency?

Retirement Every day’s Robert Powell caught up with Jeffrey Levine, CPA and tax professional from Buckingham Strategic Wealth Companions, to reply the query.

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Quotes| Does the Wash Sale Rule Apply to Cryptocurrency?

Jeffrey Levine, Chief Planning Officer, Buckingham Strategic Wealth

Jeffrey Levine, Chief Planning Officer, Buckingham Strategic Wealth

Video Transcript| Jeffrey Levine, CPA and Tax Skilled, Buckingham Strategic Wealth

Robert Powell: Does the wash sale apply to cryptocurrency? Properly, right here to speak taxes with us is Jeffrey Levine from Buckingham Wealth Companions. Jeffrey, what’s up with wash sale guidelines and crypto?

Jeffrey Levine: Properly, that is a type of areas the place when Congress wrote the regulation, issues had been very totally different. When Congress wrote the wash sale rule, cryptocurrency didn’t exist. They did not give it some thought. And so the wash sale rule says that it applies to securities or shares. Properly, cryptocurrency is taken into account property by the IRS and never a safety. And the explanation that issues is it would not fall underneath the present wash sale guidelines. 

Now, for these questioning what the heck is the wash sale anyway? The wash sale is the rule that claims, if in case you have an funding that has misplaced cash and also you promote it, you may’t purchase it again inside 30 days earlier than or after that sale. Successfully, you’ve got actually bought to do away with the funding for 30 days in an effort to get the loss. In any other case, the loss is disallowed and will get added to the idea of the brand new buy you made. Properly with cryptocurrencies, that is not true. 

So think about to procure cryptocurrency just a few months in the past when it was value, for example Bitcoin was value $50,000, and you then had it at $40,000. Properly, you would have offered it and had a capital loss after which rotated and purchased proper again. You did not have to attend 30 days. You possibly can have purchased it again the following day after which perhaps it saved taking place to $30,000. Now it is near $20,000. Properly, each time it goes down, you are capable of promote and successfully lock in that capital loss, which you’ll be able to then use to offset different good points on different investments. Hopefully, sooner or later these investments will rebound. And what’s totally different with cryptocurrency versus shares is you do not have to attend that 30 days. So I can promote that loser cryptocurrency funding at present and I should purchase it again tomorrow. In order that if it does rebound, I am in there for mainly the complete time to take pleasure in that journey up.

Editor’s Be aware: The opinions expressed on this article are these of the authors. The content material was reviewed for tax accuracy by a TurboTax CPA professional.

Zachary Faulds contributed to the writing of this text and produced the video and/or the graphics related to it.