Crypto tax-loss harvesting: how it works in the US, UK and Canada

When the crypto market falls, there’s at least one consolation: losses can reduce your tax bill. Tax-loss harvesting means deliberately selling an investment that’s worth less than you paid, so that the loss offsets gains you’ve made elsewhere in the same tax year.

The idea is simple. The rules that stop people from abusing it are not, and they differ a lot between the US, the UK and Canada. This guide explains each.

This is general information. Tax-loss harvesting interacts with your other income and gains, so check the official guidance or a tax professional before acting on large amounts.

The basic mechanics

1. You hold crypto that’s worth less than you paid for it.
2. You sell it (or swap it for another crypto, which is also a disposal in all three countries), which turns the paper loss into a realized loss.
3. You use that loss to reduce your taxable gains for the year.

The catch is step 4: most people want to stay invested, so they buy the same crypto back. That’s exactly what anti-avoidance rules target.

United States

How losses are used

According to the IRS, capital losses first offset capital gains. If your losses are larger than your gains, you can deduct the excess against other income up to $3,000 a year ($1,500 if married filing separately), and carry forward anything left to future years.

Example. In 2026 you made a $5,000 gain selling one coin, and you hold another coin bought for $12,000 that’s now worth $4,000. Selling it realizes an $8,000 loss. The loss wipes out the $5,000 gain, the remaining $3,000 reduces your other income (the yearly maximum), and nothing is left to carry forward.

What about the wash-sale rule?

For shares, the wash-sale rule denies a loss if you buy “substantially identical” stock or securities within 30 days before or after the sale. The law that contains it, section 1091 of the Internal Revenue Code, is titled “Loss from wash sales of stock or securities” and applies to sales or other dispositions of “shares of stock or securities”.

The IRS treats digital assets as property. Whether the wash-sale rule reaches crypto therefore depends on whether a particular token is a stock or security, and on the law at the time you sell. Proposals to extend wash-sale rules to digital assets have been put forward in Congress before. Because the law can change, check the current rules for the tax year in question, and be cautious with anything that looks like a security.

Even where a rule doesn’t apply, a sale and immediate repurchase made with no purpose other than creating a tax loss may be challenged under general tax principles. Keep clear records of what you sold, when and why.

Watch the lot you sell

In the US you choose, or default to FIFO, which units you’re selling, wallet by wallet. To harvest the biggest loss, you’d identify the units with the highest cost basis. See US crypto tax for how specific identification works.

United Kingdom

How losses are used

Losses are deducted from gains in the same tax year first. If your gains are still above the £3,000 tax-free allowance, you can then use losses from earlier years, and carry any remaining losses forward. You must report a loss to HMRC within 4 years of the end of the tax year in which you made it.

The 30-day rule changes the result

UK rules don’t ban buying back. They change which tokens your sale is matched with. HMRC’s guidance sets the order:

1. Same day: purchases on the same day as the sale are matched first.
2. 30 days: purchases of the same token in the 30 days after the sale are matched next (“bed and breakfasting”).
3. Pool: only what’s left is matched with your pooled average cost.

Example. Your pool holds 2 ETH at a pooled cost of £6,000 (£3,000 each). ETH is now £2,000. You sell 2 ETH for £4,000, hoping for a £2,000 loss, and buy 2 ETH back a week later for £4,100. Because the repurchase is within 30 days, your sale is matched with it: proceeds £4,000 minus cost £4,100 is a loss of just £100. The original £6,000 cost stays in your pool.

To realize the £2,000 loss, you’d need to wait more than 30 days before buying the same token again, accepting the price risk in the meantime, or buy a different cryptoasset instead.

See UK crypto tax for pooling in detail.

Canada

How losses are used

Only half of a capital loss counts (an allowable capital loss), and it can only be deducted against taxable capital gains, not other income. Net capital losses can be carried back three years or forward indefinitely.

The superficial loss rule

The CRA treats a loss as superficial, and you can’t deduct it for now, when both conditions are met:

1. You, or a person affiliated with you (for example your spouse or common-law partner, or a corporation you control), buy the same or identical property in the period from 30 calendar days before the sale to 30 calendar days after it.
2. You, or that person, still own it 30 calendar days after the sale.

The loss isn’t lost: the CRA says you can usually add it to the adjusted cost base of the property you bought back, so it reduces your gain when you finally sell. But it won’t help this year’s tax bill.

Note that the window also looks backwards: buying more of the same coin in the 30 days before a loss-making sale can make the loss superficial, if you still hold those coins 30 days after the sale.

See Canada crypto tax for more.

Practical tips for all three countries

• Do it before the tax year ends: 31 December in the US and Canada, 5 April in the UK.
• Count fees. Selling and rebuying costs trading fees and spreads, which can eat a small tax saving. See exchange fees.
• Mind the 30-day windows in the UK and Canada, and the uncertainty around wash sales in the US.
• Swapping to a different coin is also a disposal, and may avoid matching rules, but it changes what you’re invested in.
• Keep records of every trade: date, amount, price in your currency and fees. Harvesting decisions are only as good as your cost-basis records.
• Don’t let tax drive investment decisions. A tax saving on a loss is a fraction of the loss itself.