Can I Write Off Lost, Stolen, & Scammed Crypto on My Taxes?

Can I write off my crypto losses for tax purposes? 

Wondering whether your stolen/lost crypto can be deducted on your tax return? Here’s a quick breakdown of the most common scenarios where you can potentially write off your crypto. 

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We’ll explain each of these scenarios in more detail below. 

Note - if your cryptocurrency simply went down in price prior to selling it, this is considered a capital loss or an investment loss. This is different from some of the losses we discuss below. For more detailed information, please read our guide on how to deal with capital losses for your cryptocurrency.

Can I recover my lost and stolen crypto? 

Unfortunately, it’s often difficult to recover lost and stolen cryptocurrency. Cryptocurrency transactions are irreversible — and the ecosystem’s decentralized nature means that there’s typically no centralized entity that can provide help in the case of a hack. 

One exception is if you lost your cryptocurrency due to exchange bankruptcy. 

In this case, you may be able to recover your funds once the bankruptcy process is over. However, you may have to wait months or even years for the process to complete.

What should I do if I get scammed? 

Report the scam: Report the scam to your local law enforcement, relevant cryptocurrency platforms, and the FBI’s Internet Crime Complaint Center. 

Document the incident: Keep records of everything related to the scam — including the amount of cryptocurrency taken and any relevant wallet addresses and usernames. This can help a potential investigation. 

Review scam prevention: To avoid these types of incidents in the future, take some time to review best practices for scam prevention. 

What are the different types of crypto losses?

In the United States, different tax rules apply to different scenarios. Cryptocurrency losses typically fall under the following classifications — including each one of the scenarios we’ll cover in the article: 

1. Lost Crypto - (ex. Lost wallet address, crypto sent to wrong address)
2. Theft Loss - (ex. Exchange/wallet hacked, stolen coins)‍
3. Investment Loss - (Gray area = ex. ICO scam, exchange shutdown)‍‍
   

Can I write off lost cryptocurrency?

Summary: Lost cryptocurrency generally isn’t tax deductible. Since the 2017 Tax Cuts and Jobs Act, personal casualty losses are generally only deductible when they’re caused by a federally declared disaster (or, starting in 2026, a state-declared disaster). 

‍A casualty loss is damage, destruction, or property loss resulting from one of these identifiable events:

1. Sudden event: swift, rather than gradual or progressive
2. Unexpected event: unanticipated and unintended
3. Unusual event: not a day-to-day occurrence

Post 2017, after the Tax Cuts and Jobs Act was passed into law, most personal casualty losses no longer qualify as a deduction. As seen on the IRS website, a personal casualty loss is generally only deductible when it’s caused by a federally declared disaster. The One Big Beautiful Bill made this limit permanent in 2025 and, starting in 2026, added state-declared disasters. 

As a result, losing crypto you held for personal use isn’t deductible. If you held it as an investment, the TCJA limit doesn’t apply, but the IRS hasn’t said that lost keys or coins sent to the wrong address count as a casualty loss either. 

Examples of lost crypto where you generally would not receive a tax break include the following:

• Coins lost from lost access to private keys & wallets
• Coins lost from sending crypto to incorrect addresses
• Other negligent forms of crypto loss

In these cases, you cannot claim a capital gain or loss on your cryptocurrency.‍

Can I write off stolen cryptocurrency?

Summary: Yes, if you held it as an investment. Stolen investment crypto can be deducted as a theft loss. Theft of personal-use property generally isn’t deductible. 

Theft is defined as an act of taking and removing of money or property with the intent to deprive the owner of it. For an act to qualify as theft, it must be illegal under the law of the state where it occurred and done with criminal intent.

Common cryptocurrency theft losses include the following:

• Stolen Coins
• Hacked Wallets
• Hacked Exchange Accounts

The 2017 Tax Cuts and Jobs Act limited casualty and theft losses on personal-use property, and the One Big Beautiful Bill made that limit permanent. However, the limit doesn’t apply to property you hold for investment. If you bought your crypto to make a profit, a theft falls under IRC §165(c)(2), and you can still deduct it.

In 2025, the IRS Office of Chief Counsel applied this rule to scam victims in an advice memo (CCA 202511015). It concluded that victims of a pig butchering scam, a phishing attack, and a fake “fraud specialist” who talked them into moving their funds could deduct their losses. A footnote says hacked accounts get the same treatment as phishing. Victims of romance and kidnapping scams could not, because they didn’t send the money to make a profit.

The memo isn’t binding precedent, but IRS Publication 547 and the Form 4684 instructions both point scam victims to it.

Here’s how the deduction works:

• How much: Your cost basis in the stolen crypto (usually what you paid), minus any insurance or other reimbursement. What the coins were worth on the day they were stolen doesn’t matter.
• When: The year you discover the theft, once there’s no reasonable prospect of getting the funds back. If you have a pending claim, like funds frozen by an exchange or a lawsuit, you may need to wait until it’s resolved.
• Where: Form 4684, Section B. The loss then goes on Schedule A, line 16, as an itemized deduction, so it only lowers your tax bill if you itemize.
• No $3,000 cap: A theft loss isn’t a capital loss, so the $3,000 limit on capital losses doesn’t apply. It’s also not a miscellaneous itemized deduction, so the rules that eliminated those deductions (including the old 2% floor) don’t apply either.

Remember, losing access to your crypto isn’t the same as having it stolen. The IRS says the simple disappearance of money or property isn’t a theft, so lost keys and coins sent to the wrong address don’t qualify.

You can read more about the details of these rules in the IRS guidance here.

How are pig butchering scams taxed?

Summary: You may be able to deduct cryptocurrency lost in specific scams like pig butchering. 

Certain types of scams like pig butchering may be deductible on your taxes. 

In a pig butchering scam, a scammer builds trust with a customer over time, often through fake relationships, texts, or social media, and convince victims to invest in cryptocurrencies. Victims believe they're making a legitimate investment, but the scammer steals the funds and disappears. 

In CCA 202511015, the IRS Office of Chief Counsel concluded that a pig butchering victim could deduct the loss under IRC §165(c)(2). This rule allows you to deduct losses that:

• Incurred as a result of a transaction entered into for profit
• Not connected to trade or business 

Based on this language, you may be eligible to claim a tax deduction if you believed you were making a legitimate investment. You can report this loss on Form 4684 Section B. 

To claim this loss, you’ll need documentation (such as messages with the scammer) to prove that you entered into the transaction with the intention of making a profit.

Romance scams are treated differently. If you sent money to help someone you thought you were in a relationship with, rather than to invest, the IRS treats it as a personal loss, which isn’t deductible.

Can I write off investment losses?

Summary: When you dispose of your cryptocurrency at a loss, you can offset capital gains and up to $3,000 of income. 

One scenario where you can write off your cryptocurrency on your taxes is an investment loss. This is when you dispose of your cryptocurrency for a lower price than you originally received it.

These types of capital losses can offset capital gains and up to $3,000 of income for the year. Additional losses can be rolled forward into future tax years. 

In some cases, you can claim an investment loss in scenarios like a rug pull or an exchange bankruptcy. We’ll go into more detail about how you can claim investment losses in these scenarios below.

Can I claim a tax deduction on a crypto/NFT scam?

Summary: To write off a rug-pulled or scammed token or NFT, you generally need to sell or swap it (even for a tiny amount) and claim a capital loss. If the project was a criminal fraud, you may be able to claim a theft loss instead. 

Occasionally, investors lose money on crypto tokens or NFTs that turn out to be fraudulent or non-existent. 

If the asset has liquidity and is still being traded on exchanges, you can only claim a loss once you’ve disposed of it. This is true even if your crypto-asset has lost significant value. 

If there’s no market for the asset at all, simply holding it doesn’t create a deduction. The IRS has said that a loss on worthless or abandoned crypto is a miscellaneous itemized deduction, which individuals can’t claim. Look for a way to sell or swap it, or check whether the scam qualifies as a theft loss.

How are exchange bankruptcies taxed?

Summary: You generally can’t deduct crypto lost to an exchange bankruptcy until it’s reasonably certain how much you’ll recover. After that, you may be able to claim an investment loss, for example by selling your bankruptcy claim. 

Some tax professionals recommend treating cryptocurrency lost to an exchange bankruptcy, like Celsius and FTX, as an investment loss. 

Can I claim my assets as worthless if I don’t have access to them?: Usually not right away. While the bankruptcy is still paying out and you can reasonably expect to get something back, you generally can’t deduct the loss. Simply calling your crypto ‘worthless’ doesn’t create a deduction either, because the IRS treats a loss on worthless or abandoned crypto as a miscellaneous itemized deduction, which individuals can’t claim. 

Once it’s reasonably certain how much you’ll recover, you may be able to claim a loss, for example by selling your bankruptcy claim. If the collapse involved criminal fraud, a theft loss may also be possible. If you claim a loss but keep your bankruptcy claim, you may have to report any later distribution as income in the year you receive it.

What happens if you claim a casualty loss?: An exchange bankruptcy generally isn’t a casualty, and personal casualty losses aren’t deductible outside declared disasters, so this route usually doesn’t work.

How to report your lost & stolen crypto with CoinLedger

Looking for an easy way to report your lost and stolen cryptocurrency? You can report your losses on crypto tax software like CoinLedger. Here’s a complete walkthrough of the process.

File your cryptocurrency taxes today

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