Crypto scam tax write off: what your accountant needs

The tax write-off is the only "recovery" most crypto scam victims ever get. And that's a brutal sentence, but it's also the most useful one on this page.

A crypto scam loss may be deductible on your US taxes as a theft loss, depending on when it happened, whether you put the money in expecting a return, and how well you can document it. The rules changed in 2018, and the IRS issued guidance in 2025 on when losses to investment scams can be claimed. So whether yours qualifies is a question for a tax professional with your records in front of them. What you can control today is the records.

Now, I'm not an accountant, and this isn't tax advice. I'm the guy who's sat with a lot of folks the week after, and I know what their accountant asked them for.

So who's this for? It's for anyone who lost money to a crypto scam and wants to walk into their accountant's office with the right paperwork instead of a shoebox. And if you came here hoping the deduction makes you whole... it doesn't. It softens the blow, sometimes over several years, and that's worth doing properly.

Can you deduct a crypto scam loss on your taxes?

Sometimes. And "sometimes" is doing real work in that sentence.

Here's what's stable. Since the 2018 tax law changes, personal casualty and theft losses have been sharply limited for individuals. Then in 2025 the IRS released guidance saying that losses from certain scams, where the victim transferred money expecting a profit, may be claimed as theft losses, while losses from scams with no profit motive generally may not. So the distinction turns on facts: what you were told, what you expected, and what you can prove. The IRS covers the general rules in Topic 515, Casualty, Disaster and Theft Losses.

So the question your accountant is going to ask isn't "were you scammed?" It's "what did you think you were buying, and can you show it?"

What does a crypto scam tax deduction actually need?

Documentation, and more of it than people expect. So build this folder before your appointment:

1. A police report. The report number is the document most accountants want first, so file it even if nothing comes of it.
2. The FBI IC3 confirmation. File at ic3.gov and keep the confirmation. The full reporting order is in how to report a crypto scam.
3. Every transaction. Exchange statements showing the purchase, wallet addresses you sent to, transaction hashes, and dates. The blockchain is public, which for once works in your favor.
4. The pitch. Screenshots of the platform, the dashboard, the promised returns and the messages. This is how you show you expected a return, which is the part the 2025 guidance turns on.
5. The "withdrawal fees" and "taxes" you paid. Those were part of the theft, so document them separately.
6. The year you discovered it. Theft losses are generally claimed for the year you discover the theft, not the year you sent the money. So write down when you knew.

Then take all of it to someone who does crypto taxes for a living, not a general preparer who's going to shrug at a transaction hash.

What did the real estate investor do?

Back in 2017 a commercial real estate broker I knew asked me about a platform, and I told him it was a fraud. He invested first and asked second, and he lost roughly $35,000. He never got a dollar of it back from anyone. But what he did get was a theft loss that he wrote off over several years, because he kept his records and had an accountant who knew how to file it.

And that's the realistic version of "recovery." It's not the number on the dashboard, and it's not even the principal. It's a smaller tax bill, spread out, and earned with paperwork. But compared to paying a "recovery agent" $1,500 to disappear, it's the best deal on the table.

What this page doesn't cover

Whether your specific loss qualifies, how much you can claim, and how it interacts with your other income are questions only a tax professional can answer with your records. Rules differ outside the United States. And the rules inside the United States have changed more than once since 2018 and may change again, so check the current IRS guidance rather than trusting any page, including this one, as the last word.

Where this fits

Before you talk to anyone about taxes, read legitimate crypto recovery companies, because the "tax specialist" who messages you first is the recovery scam wearing a cardigan. The reporting that produces your paperwork is in how to report a crypto scam. And the four questions that stop the next one are on how to spot a crypto scam.

If you want someone who does this every day, our crypto tax bookkeeping service reconciles exchange and wallet records for traders and investors, including the year a scam has to be accounted for. And if you're ready to make sure there's never a second one to write off, start where new members who got scammed first start: after a crypto scam, the way back.

So here's your job this week. File the police report, download your exchange statements, and put everything in one folder with the date you discovered the theft written on the front. That folder is the only part of this you control.

This is education, not tax, legal or financial advice. Talk to a licensed tax professional about your situation.