Most Americans unaware their $1.7 billion in bitcoin losses last year are likely tax-deductible

After last year's cryptocurrency market meltdown, Americans who sold their holdings realized approximately $1.7 billion in losses on their investments in bitcoin, according to Credit Karma research. “As for those who haven’t sold yet, their unrealized losses total an approximate $5.7 billion,” the research found.

However, only around half (53%) of those investors surveyed by Credit Karma are planning to report their bitcoin gains or losses on their taxes. More interestingly yet, those who lost money are less likely to report their losses (35%), even though they could claim a tax deduction. Fifty-eight per cent of investors were actually not even aware they were entitled to a tax deduction, according to the survey.

“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,” the research claims.

Over a third of all investors believed they were not required to report their gains or losses in bitcoin. Researchers thus suggest some education on the part of investors might be needed to fix this situation. The report says, “[i]nforming bitcoin investors that they have an obligation to report gains — no matter how small — on their federal income taxes and showing them how to do so could help keep taxpayers out of trouble.”

Image credit: Shutterstock/michaelmond