Crypto Tax-Loss Harvesting Examples: Netting, Basis and Carryovers

A useful loss-harvesting calculation must show short- and long-term netting, existing carryovers, the $3,000 ordinary-income limit, transaction costs and the lower basis of any replacement crypto. Subtracting all losses from all gains in one line can give the wrong answer.

Reviewed October 9, 2026. The examples are simplified federal illustrations for individual investors. They are not rate quotes or personal tax projections. The carryover example labels the tax years so that a loss used in one return is not deducted again in the next.

Inputs a defensible calculator needs

• asset, wallet or account and units;
• specific acquisition date and adjusted basis;
• sale date, proceeds and eligible fees;
• short- or long-term character;
• all other capital gains and losses;
• prior-year carryovers;
• asset classification under section 1091;
• replacement purchase cost and date.

Current market value minus portfolio average is not enough. Basis must belong to the units actually disposed of under valid identification rules.

Example 1: loss offsets a capital gain

Leo has a $12,000 short-term gain and owns a separate lot with $9,000 adjusted basis and $4,000 current value. He sells that lot for $4,000 and incurs $100 of eligible selling costs. Simplified amount realised is $3,900, creating a $5,100 short-term loss.

The short-term category becomes a net $6,900 gain before other items. The tax effect depends on Leo's marginal rate, state, net investment income tax and the rest of the return. Saying the loss “saved $5,100” confuses tax base with tax.

Example 2: short loss and long gain

Ada has a $20,000 net long-term gain and harvests an $8,000 short-term loss, with no other capital items. After separate category netting, the short-term loss offsets the long-term gain, leaving a $12,000 net long-term gain.

The loss does not automatically save tax at the short-term rate because there was no net short-term gain. The final character after cross-netting matters. Use IRS Topic 409 and Schedule D instructions.

Example 3: net loss and carryover

Sam ends 2025 with a $14,000 net capital loss and files single. Assume he has enough other taxable income to use the full $3,000 deduction and no other capital items. Then $3,000 reduces other income in 2025 and $11,000 carries forward. If income is insufficient, use the actual capital-loss carryover worksheet rather than mechanically subtracting $3,000. The carryover retains short- and long-term components; it is not simply an unclassified balance.

Married filing separately generally uses a $1,500 limit. The crypto capital-loss guide explains carryover reporting.

Follow the loss into the second tax year

Suppose Sam's 2025 loss consists of $6,000 short-term and $8,000 long-term losses. The $3,000 deduction uses short-term losses first, leaving a $3,000 short-term and $8,000 long-term carryover into 2026. Keep those two amounts separately in the tax file.

In 2026 he has $5,000 of new short-term gains and $2,000 of new long-term gains, with no other capital items. The short-term category is $5,000 − $3,000 = $2,000 gain; the long-term category is $2,000 − $8,000 = $6,000 loss. Cross-netting gives a $4,000 net long-term loss. Assuming enough other income again, a $3,000 deduction leaves a $1,000 long-term carryover into 2027. The original $11,000 carryover has been used once: $7,000 against 2026 gains, $3,000 against other income and $1,000 remaining.

IRS Publication 550 explains that short-term losses are used first for the annual deduction and that carried losses retain their character. Apply the worksheet for the actual filing year; a market decline in coins still held is not another realised loss.

Example 4: current loss versus future lower basis

Nina sells non-security spot crypto with $10,000 basis for $6,000, recognising a $4,000 loss, then genuinely repurchases for $6,050 when section 1091 does not apply. Her new basis is generally $6,050 and her holding period restarts.

If she later sells for $11,000, the new lot has a $4,950 gain before fees. Harvesting accelerated the loss but did not preserve the old $10,000 basis. A complete calculator displays current tax effect and future embedded gain.

Lot selection can change the answer

Suppose a wallet contains one BTC lot with $70,000 basis and one with $30,000 basis while BTC trades at $50,000. Selling one BTC produces a $20,000 loss only if the high-basis lot is adequately identified; defaulting to another lot can produce a gain.

Document identification under current wallet- or account-level rules before disposition. For eligible custodial dispositions in 2025 and 2026, Notice 2026-20 permits timely identification in the taxpayer's own records under its conditions, including qualifying standing instructions. Broker communication is therefore not the only route during that relief period. The relief does not permit a retrospective choice after seeing the tax result, does not extend to self-custody on those terms and does not change the broker's separate reporting duties. The US capital-gains guide covers basis identification.

Include costs once

Eligible sale fees reduce amount realised; eligible acquisition fees increase basis. Network fees paid with a separate token can also dispose of that token. A calculator should not both subtract a fee from proceeds and deduct it elsewhere.

Economic planning also includes spread, slippage, withdrawal cost and market movement during repurchase. A $200 projected tax benefit can disappear after trading costs.

Add a wash-sale classification check

Section 1091 applies to stock or securities, including a digital asset that is a tokenized security when the statutory tests are met. Non-security spot crypto generally falls outside the current wording, but classifying every digital asset as exempt is unsafe.

Use the US crypto wash-sale guide for tokenized securities, related parties and replacement purchases. The official section 1091 text is the legal starting point.

Reusable worksheet

1. Calculate each proposed sale's proceeds minus adjusted basis.
2. Separate short-term and long-term results.
3. Add already realised gains and losses.
4. Apply carryovers from the prior Schedule D worksheet.
5. Net categories under Schedule D.
6. Apply the $3,000 or $1,500 limit to any net loss.
7. Estimate federal and state tax effect.
8. Subtract fees and market cost.
9. Record replacement basis and future embedded gain.
10. Reconcile the executed sale on Form 8949.

For the execution calendar, use the 2026 year-end harvesting plan.

Loss-harvesting calculation FAQ

Disclaimer: This article is for general informational purposes only and does not constitute tax advice. For individual tax advice, consult a licensed tax professional.