How to Report Stolen Cryptocurrency on Taxes
We’re looking at everything you need to know about crypto scam losses, how to report stolen crypto on taxes, and what you can do if you've been scammed.
Crypto scams remain, unfortunately, common in the market.
There's little you can do to recover scammed or stolen crypto, given it's an unregulated market.
You won't pay tax on any stolen crypto, and you may be able to claim it as a loss depending on where you live.
Will I pay tax on coins lost in a crypto scam?
Good news: if your crypto was stolen in a scam, it is not considered a disposal. This means you do not owe capital gains tax on it.
Can I claim crypto lost in a scam as a capital loss?
But can you claim it as a capital loss to reduce your tax bill? In most cases, the answer is no. Since theft is not treated as a disposal, many tax authorities, including the IRS in the United States, do not allow you to claim it as a capital loss.
In short, the crypto is gone, and there is no recognized gain or loss for tax purposes.
However, tax rules differ depending on your country. Let’s take a look at how different regions handle crypto lost in scams.
Watch: What are the tax implications of crypto scams?
IRS crypto scams
The IRS recently clarified that most crypto thefts cannot be claimed as capital losses due to the 2017 Tax Cuts and Jobs Act, which suspended personal theft loss deductions. However, in limited cases involving fraud with a profit motive, like phishing or investment scams, deductions may be possible. Documentation is key.
Learn more in our dedicated crypto tax write-offs guide.
HMRC crypto scams
HMRC does not treat stolen crypto as a disposal, so it cannot be claimed as a capital loss. However, if crypto becomes worthless due to fraud, you may be eligible to file a “negligible value” claim.
Learn more in our HMRC crypto losses guide.
ATO crypto Scams
The ATO allows stolen crypto to be claimed as a capital loss, but proof is essential. You must show ownership, transaction history, wallet details, and the date of theft. Losses on personal use assets (e.g., used to buy personal goods) do not qualify.
Learn more about ATO crypto tax write-offs.
CRA crypto scams
The CRA has no specific crypto scam guidance, but stolen capital assets can be claimed as losses. This likely applies to crypto, too. You can only claim your original investment amount, not any unrealized gains.
How to report stolen cryptocurrency on taxes
1. Determine if it's considered a capital loss
In most countries, including the United States, stolen crypto is not treated as a capital loss because it was not sold or disposed of. This means you typically cannot deduct the loss from your capital gains.
If you can realise your gain, however, by somehow disposing of your tokens like with a burn wallet, you can realise the loss and offset it.
2. Check local tax laws
Tax treatment varies by country. Some jurisdictions may allow you to report stolen crypto as a theft loss or casualty loss under specific conditions and with enough evidence, although the guidance is limited. Check with a tax advisor or your tax office.
3. Document the theft
Even if you can’t claim a loss, it’s important to keep detailed records in case you’re audited:
Date of the theft
Value of the crypto at the time
Wallet addresses involved
Screenshots or transaction records
Reports filed with law enforcement or fraud websites
4. Do not report it as a sale or disposal
Do not list stolen crypto as a sale or disposal on your tax return (unless you've disposed of worthless tokens). This could trigger unintended Capital Gains Tax.
5. Consult a tax professional
Crypto tax rules are evolving. A crypto-savvy accountant can help ensure you report the situation correctly and explore any options you might have based on your location and circumstances.
How can Koinly help with stolen crypto taxes?
Regardless of how your tax office views crypto scams, a crypto tax calculator like Koinly can help simplify reporting your crypto taxes.
You can tag any crypto lost to a scam as lost in Koinly. This tag means Koinly won’t generate any gains or losses from this transaction.
When you later generate your crypto tax report, your lost crypto will have its own report section, so it’s easy to identify the transaction and file it with your tax office accordingly. You’ll also have a more detailed breakdown of the transaction with dates, cost basis, and more in the report, should you need proof to hand over to your tax authority.
Koinly makes crypto tax simple. Sign up for free today.
