Most cryptocurrency enthusiasts will agree the year 2018 is best forgotten quickly. A lot of financial losses were sustained during this period. That is only normal, after the ludicrous end of year the market went through in 2017. A new report shows US investors lost nearly $2bn from trading Bitcoin alone. This allows for some interesting tax deduction options, though.
The Upside of Bitcoin Trading Losses
Most US traders are seemingly unaware a net loss in Bitcoin trading can be quite lucrative. Although everyone prefers making money, the deficit can serve another purpose in a positive manner. In the United States, these financial losses can be deducted from one’s tax filings. Although it will not offset the total losses sustained, it is still a form of recuperating some money in the process.
More specifically, US traders lost $1.7bn through Bitcoin trading in 2018. That is a very high figure, but one that won’t surprise too many traders either. The massive bearish pressure caused a significant Bitcoin price decline. All other tokens, assets, and currencies saw similar market trends last year, which is only normal. Credit Karma, the firm conducting this research, confirmed last year wasn’t great. In fact, there were even unrealized losses of over $5bn. This further shows how much money can be made or lost with cryptocurrencies these days.
What is rather remarkable is the approach US traders take to these losses. Rather than try to deduct them from their taxes, they simply let it slide. A very unusual development, considering the taxation guidelines in this country. Any net loss sustained from trading Bitcoin can be turned into a tax education. It is uncanny how few people actively pursue this option at this time. The company further explains:
“Even though those who sold their bitcoin at a loss can typically claim a tax deduction we found that before taking our survey, 61% of respondents who lost money on bitcoin didn’t actually realize they could get a tax deduction for bitcoin losses. Once polled by Credit Karma, only 58% said they are more likely to file the losses and claim the deduction now they know they can.”
This in itself highlights a bit of a problem among US Bitcoin traders. The majority either doesn’t want to – or doesn’t know – they can file losses as part of their crypto taxes. Although a lot of traders are uncomfortable sharing this information with the IRS, it is evident any option needs to be explored in this regard. Especially when it comes to tax deductions, no options should be overlooked whatsoever.
One also has to keep in mind the tax industry might be to blame for this, albeit partially. Bitcoin still remains a very delicate subject. Most accountants don’t even know how to handle this asset either, which makes the current situation a bit more logical. Something will need to change to ensure Bitcoin traders deduct these losses in the future. As the year 2019 is shaping up to be rather bearish as well, this information may become rather handy in the future.
Disclaimer: This is not trading or investment advice. The above article is for entertainment and education purposes only. Please do your own research before purchasing or investing into any cryptocurrency.