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- What happened to Luna/Terra?
- Can I write off my Luna/Terra losses?
- My LUNA got converted to LUNC. Can I still claim my losses?
- I was airdropped LUNA 2.0. How do I report this on my taxes?
- Where do I report my Terra/Luna losses?
- What should I do if I can’t pay my tax bill?
- How can I get started with tax-loss harvesting?
If you lost money on Luna and Terra, you may have the opportunity to save thousands of dollars on your tax bill.
In 2022, the Luna ecosystem lost billions of dollars of value in the span of a few days. Many investors were left with holdings that were close to worthless.
In this guide, we’ll break down everything you need to know about writing off your Luna losses on your tax return — whether you sold your coins or you’re continuing to hold.
What happened to Luna/Terra?
In May 2022, the price of Luna began to plummet after the ecosystem’s Terra stablecoin lost its peg with the U.S. dollar. Investors traded their Terra stablecoin for Luna, then exited their Luna positions, which tanked the price of both assets.
As a result, Luna’s market capitalization fell from $30 billion to less than $1 billion in the span of a few weeks.
Can I write off my Luna/Terra losses?
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Can I write off my losses if I sold my coins?
If you sold or otherwise disposed of your Terra/Luna at a loss, you can claim a capital loss on your tax return. Remember, capital losses can offset capital gains and up to $3,000 of income for the year. Any capital losses above this amount can be rolled forward into future tax years.
For more information, check out our guide to crypto capital losses.
Can I write off my losses if I didn’t sell my coins?
Typically, investors can only write off unrealized losses if there is no reasonable expectation of return and there is no trading volume on exchanges. Because Luna and Terra are still being traded on exchanges, it’s likely that you won't be able to claim a capital loss if you’re still holding your coins.
If you wish to claim a capital loss, you’ll likely need to dispose of your Terra/Luna holdings.
My LUNA got converted to LUNC. Can I still claim my losses?
Weeks after Luna’s crash, Terraform Labs released Luna 2.0. As a result, the coin originally known as Luna became known as Terra Luna Classic (LUNC).
The conversion of LUNA to LUNC will likely not be considered a taxable event. In the past, the IRS has not taxed these types of cryptocurrency ‘rebrandings’.
If you are holding LUNC, you can still claim capital losses by disposing of your assets. Your cost basis will be your original cost for acquiring LUNA.
Frequently asked questions
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