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💡 Saim’s Tip: Even with updates like the 1099-DA’s Box 1i for disallowed wash sale losses, how is the IRS going to see this stuff? The IRS only sees on-ramp exchanges that generate 1099-DA forms.
Hey everyone, Saim here, your Crypto CPA from the Lone Star State at Akif CPA and ChainBlock Financial. Today, we’re talking about tax loss harvesting, one of the most powerful yet underutilized tools in the IRS tax code for crypto investors.
What is Crypto Tax Loss Harvesting?
Tax loss harvesting is when you sell a crypto asset at a loss and immediately buy it back. Tax-wise, you’re basically creating a deductible capital loss to offset your capital gains.
For traditional equities, there’s a 30-day wash sale rule, but that doesn’t fully apply to crypto yet. You have to be careful and strategic, but if you’re a crypto investor you can still use this to reduce your tax liability.
1099-DA Form Box 1i Causing Panic
Why is everyone freaking out? It’s a new box on the 1099-DA form.
We looked at the new form:
📌 Box 1i → “wash sale losses disallowed.”
Sounds like the end of tax loss harvesting, right?
Not so fast. Here’s why I say NO
- IRS + Treasury don’t have full visibility into DeFi
- On-ramp exchanges (Coinbase, Kraken, Gemini) are trackable
- But what about international exchanges?
- Or logging in with a VPN?
- Or directly investing into DeFi projects?
Even with updates like the 1099-DA’s Box 1i for disallowed wash sale losses, how is the IRS going to see this stuff? The IRS only sees on-ramp exchanges that generate 1099-DA forms. DeFi platforms, international exchanges, and VPN transactions remain largely outside the IRS’s current data scope.
This means tax loss harvesting remains a valid strategy for many crypto investors. The rules are complicated, but we can still use it to lower taxes on your…
- 1040 (individual)
- 1120-S (S-Corp)
- 1120 (C-Corp)
- 1065 (Partnership)
Saim’s Takeaway
Look, regulations are changing all the time, and compliance is the #1 key here. But, tax loss harvesting is still active, and we’ve used it strategically AND LEGALLY to save our clients millions in taxes.
The key is knowing how to classify transactions correctly and use the IRS rules to your advantage (and not ignoring letters when you get them).
✅ Tax loss harvesting is still an option for the #cryptofam. Just make sure your CPA knows what they’re doing here.
About ChainBlock Financial
ChainBlock Financial is Akif CPA’s dedicated Crypto CPA branch. Saim Akif and his team work diligently to make sure clients understand the latest IRS rules and are compliant, but strategic about keeping those hard-earned crypto rewards. Sign up for a crypto tax audit today!
