David Kemmerer, co-founder & CEO of CoinLedger, joined Cheddar News to explain how crypto losses can be turned into tax savings.

David Kemmerer, co-founder &amp; CEO of CoinLedger, joined Cheddar News to explain how crypto losses can be turned into tax savings. “Cryptocurrencies actually present an even better asset class for tax-loss harvesting given how the IRS deems the asset as property and not as a security,” he explained.

Turning Crypto Losses Into Gains

well with Bitcoin's value down more than 60% this year, many investors are sitting on some pretty hefty losses in their crypto wallets and adding to the pain is the bankruptcy of the crypto lending platforms, Celsius, the implosion of F. T. X. And others. And then the rise of crypto hacks, scams and frauds 2022 on track to become a record year with more than $3 billion worth of crypto stolen in just the 1st 10 months. And joining me now to help try to soften the blow is David Kemmerer co founder and ceo of coin ledger, crypto tax software companies. So David, it's good to see you and a lot of investors wondering, I think if these losses in crypto, if there's any way to lessen the load, perhaps when it comes to taxes by reducing your taxable income. Yeah and the answer is yes. Um given that markets have taken you know a drastic turn downwards this year, if you're sitting on unrealized losses in your crypto portfolio and you'd be wise to take a look at what assets you can afford to sell and otherwise harvest those losses which as you mentioned will reduce your taxable income for the year for some people by thousands and thousands of dollars. Okay, so let's zone in on that David tax loss harvesting is the term here I heard you reference it. Their investors obviously can take advantage of that across any investments when it comes to stocks, bonds and it sounds like even Cryptocurrency, is that right? Yep that's right. And cryptocurrencies actually present an even better asset class for tax loss harvesting given how the I. R. S. Deems the asset as property and not as a security. So traditional rules like the wash sale, it's consensus in the space that that doesn't currently apply to Cryptocurrency so you can harvest your losses or sell your assets at a loss and then buy them back a short period after if you're still bullish on the asset and still realize that capital law. So there's a lot of tax savings to be had by investors and they'd be wise to um look at those. So here's another question for people who lost all of their capital. David, not just that they have a down investment, but let's say they invested in FT. X. Celsius, these were big bankruptcies, implosions that we saw throughout the course of this year. Is there any way to recoup any money from that when it comes to tax season? Yeah, it depends. And number one, you should speak with an advisor on your specific situation because there can be differences but in general, if you have capital locked up in one of these now bankrupt platforms, technically you still have a claim to that capital. So you haven't actually realized losses or gains on that investment yet. Now you can do some interesting things maybe you wanna sell your bankruptcy clay claim to a buyer, you know that's happening in the marketplace, then you'd be able to realize the losses. But in reality you can't claim a loss on assets that you still have a claim to unless until the bankruptcy has actually proceeded and you've determined how much you are or are not going to get back from the bankruptcy proceedings. Okay, so my last question, David, is hacks scams. People lost money that way on Cryptocurrency too. Is there any way that this tax season can give them any sort of cushion in the wake of what would have been a hacker a scam? Yeah. So most hacks scams are likely going to fall into casualty losses, which are not deductible, but depending on the nature of the hack or scam, it could fall into an investment loss, which then it is tax deductible. It does depend on the situation. Um, and kind of the details that the certain investor was in regarding the hacking loss. So I would advise speaking to a tax professional or using a platform like coin ledger to help determine that tax liability. Okay, David, all good things to know. Obviously you do have to report Cryptocurrency gains and losses when you do report taxes. I think that's an important note as well. That's David, Cameron, co founder and ceo of coin ledger