Offsetting crypto losses: Can they be deducted from taxes?

Every day, an expert from the t-online advice editorial team answers a reader's question about money. Today: How many years can you offset crypto losses?

Cryptocurrencies such as Bitcoin and Ethereum have attracted numerous investors and raised billions of dollars in investment money since Donald Trump was re-elected as US president. Bitcoin's market capitalization is currently €1.94 trillion, based on a price of around €98,000 per Bitcoin and a supply of 19.81 million Bitcoins in circulation.

Those who got in early can look forward to high profits. But what happens if the investment does not bring the hoped-for profit? Can losses from crypto transactions be deducted from taxes ? And above all, the question: How many years retroactively is this possible? A t-online reader wanted to know.

A profit from cryptocurrencies is made when the selling price is higher than the original purchase price. Conversely, a loss is made when the selling price is lower. For example, if you buy Bitcoin shares for 5,000 euros and later sell them for 7,000 euros, your profit is 2,000 euros (before taxes). If the selling price falls to 3,000 euros, however, you incur a loss of the same amount.

In Germany, cryptocurrencies are considered private sales transactions according to Section 23 of the Income Tax Act. Profits are taxable if the period between purchase and sale is less than one year. If the holding period is more than one year, the profits remain tax-free. Example: If you buy Ethereum and sell it after 11 months with a profit, you have to pay tax on this. If you only sell after 13 months, the profit remains tax-free.

Good to know: The tax exemption for profits from private sales of cryptocurrencies does not refer to a calendar year, but to the individual holding period of 12 months per transaction . The decisive factor is the period between purchase and sale. If you bought Bitcoins in June 2024, profits from a sale from July 2025 will be tax-free - regardless of the financial year. The 12-month period applies separately to each individual purchase, so that with regular purchases, different holding periods can run in parallel.

If you want to offset losses from crypto transactions against profits, you must distinguish between the following cases:

Example: If you made a loss of 50,000 euros with cryptocurrency A and a profit of 10,000 euros with cryptocurrency B in the same period, you can offset a maximum loss of 10,000 euros. You can carry the remaining loss of 40,000 euros forward to future years and offset it against future profits from private sales transactions or - if you had taxable crypto profits in the previous year - use a loss carryback to the previous year.

Important: You cannot offset crypto losses against other types of income such as capital gains (dividends, interest, profits from the sale of securities), wages or business income.

In order to claim losses, you must declare them in your tax return . It is important to document all transactions in detail, especially purchase and sales receipts and bank statements. This is the only way you can prove the origin and amount of the losses to the tax office.

Both gains and losses from private sales must be declared in your tax return if you realized them within the one-year holding period. Even if no tax is due, you should provide this information to ensure a complete and accurate tax return.

You must actively claim losses from private sales transactions with the tax office. The tax office can only carry forward losses if they have been declared. So if you forget to declare losses, they will not automatically be carried over to the next year. However, if you have made losses with cryptocurrencies that have not been reported in your tax return, they will not automatically expire.