Investors who hold Bitcoin directly can generally sell at a loss and buy it back immediately while claiming the loss, because federal wash-sale rules apply to stocks and securities, while the IRS treats cryptocurrency as property.

For example, selling Bitcoin bought for $126,080 for $75,662 realizes a $50,418 long-term loss; buying it back resets the cost basis to $75,662 and restarts the holding period.

That loss can offset capital gains, potentially saving about $7,560 in federal tax if it offsets $50,418 of long-term gains taxed at 15%; losses beyond gains can offset up to $3,000 of ordinary income annually, with any remainder carried forward.

Tax-loss harvesting generally defers taxes rather than eliminating them, since a later sale after Bitcoin rises may produce a taxable gain, so the strategy is most useful for investors with gains to offset.

There are important caveats: Bitcoin exchange-traded fund shares are securities, so buying them back within 30 days can trigger the wash-sale rule, and the economic-substance doctrine or differing state tax rules could also affect a claim.

Two proposed bills could change the treatment: Senate bill S. 5616, introduced September 30, 2026, would extend wash-sale rules to digital assets, while House bill H.R. 10357 passed the Ways and Means Committee on September 16, 2026, with a proposed September 14, 2026 effective date that could apply retroactively; neither bill is law yet.

To count toward 2026 taxes, a loss sale must be completed by December 31, 2026; investors should document transaction dates, prices and the specific lots sold, and check the bills’ status before trading.