Tax tips: How to tackle crypto losses on your 2022 tax return

During a volatile year for crypto investors, with a focus on Bitcoin (BTC-USD), Ethereum (ETH-USD), and Dogecoin (DOGE-USD), it's important to understand the rules surrounding taking losses on your tax return.

Yahoo Finance’s Rebecca Chen breaks down the three top tips for investors. The first thing to know is that you can deduct up to $3,000 of your capital losses against your ordinary income. This means that if you experienced a net capital loss during the year, you can use up to $3,000 of it to offset your ordinary income, such as your salary and wages.

Watch the video to find out what her other two tips are before 2022 Federal taxes are due on Tuesday, April 18.

Video Transcript

REBECCA CHEN: Crypto investors have weathered through a volatile market this past year. And if you're one of them, there are a few rules you should know regarding taking losses on your tax return, and here are our top three tips.

The first is you can deduct up to $3,000 of your capital losses against your ordinary income. What this means is if you have a net capital loss during the year, you can use $3,000 of it and offset your ordinary income such as salary and wages.

And you might ask, what if you have more than $3,000? And that brings us to our tip number two, and that is please document and track any capital losses because you can indefinitely bring them forward. So if you have extra capital losses, you can always bring them next year to offset any future capital gains, or you can always take the $3,000 ordinary losses.

Our last but not least tip-- experts recommend that if you had a cryptocurrency that imploded in value or went bankrupt, you can always try to sell it for 0.1% of a cent just to claim that capital loss. And the reason is because the worthless security law around crypto is extremely unclear, so this is a workaround to help you claim your losses.