I made some bad trades last year and ended up with significant losses. My accountant mentioned something about using crypto losses to offset gains, but can you actually deduct them against regular income or other types of investments? How does this work exactly for 2026 tax season?
I got burned on some trades myself last year and had to sit down with tax stuff for the first time, so I know how confusing this gets. The basic rule is that capital losses can offset capital gains dollar-for-dollar, which is the main benefit. If you sold crypto at a loss and also had gains elsewhere (stocks, real estate, more crypto), those losses directly reduce what you owe tax on for those gains. That part's pretty straightforward.
Where it gets trickier is regular income. You can actually use excess capital losses to offset up to $3,000 of ordinary income like wages or freelance work, but only $3,000 per year. So if your crypto losses were way bigger than that, you don't get to use it all in one year. The good news is any losses beyond that $3,000 carry forward indefinitely into future years, so you're not just losing them. Your accountant should be tracking this for you on Schedule D and the capital loss carryover form.
The main thing to keep in mind is that crypto gets treated as a capital asset for tax purposes, same as stocks or real estate. Make sure you're reporting each individual trade with its purchase date, sale date, and the exact amount you paid versus what you sold it for. The IRS takes this seriously, so don't just lump everything together. For the 2026 tax season specifically, the rules haven't changed from what I described, but definitely double-check with your accountant since tax law can shift.
You can't just write off crypto losses against your regular W2 income or salary - that's the trap people fall into. Capital losses (which includes crypto) first wipe out capital gains, and only then can you deduct up to $3,000 of net losses against other income like wages. Anything beyond that $3,000 carries forward to future years. So if you had $50k in losses, you'd offset any gains you made, knock $3k off your regular income this year, and the remaining $47k sits there to use in later years. Are your losses bigger than your gains, or did you have gains elsewhere to offset first?
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