Americans Lost $1.7 Billion in Bitcoin Investments Last Year
Anyone who was paying even the slightest bit of attention to cryptocurrency prices last year has to figure that a lot of people lost a lot of money. In fact, according to Credit Karma (as reported by MarketWatch), Americans lost a total of $1.7 billion in 2018 by investing in Bitcoin. Moreover another $5 billion in unrealized losses is also estimated.
While the losses themselves may be expected, something most investors don’t realize is that they can deduct these losses on their taxes. As part of their survey, Credit Karma repors that 61% of respondents who lost on Bitcoin investments last year weren’t aware that such deductions were possible. Luckily for them, once informed about this option, 58% told the site they then now plan to take advantage of it. When asked why they hadn’t considered claiming their crypto losses before, a majority said they’d assumed their gains or losses to be too small to report.
Of course reporting cryptocurrency investments on your taxes is a two-way street, with few bothering to report their gains either. Last year a mere 100 users of Credit Karma’s free tax service reported cryptocurrency gains on their returns, which worked out to about 0.4%. However it should be noted that that figure was pulled in February of 2018, two full months before 2018 tax returns were due — not to mention that Credit Karma tax is far from the only tax-filing avenue. Still the general consensus among observers is that most were either knowingly or unwittingly skipping out on their crypto tax reporting duties. Beyond that, CryptoTaxProEZ specialist Gary LaRoy says the lack of knowledge extends to the tax preparers, telling MarketWatch, “I think it’s ignorance of the law and ignorance on the part of the tax industry. If you ask the average tax [accountant] they don’t know anything about it and they’re not asking about it. They’re doing a disservice to their clients.”
Speaking of taxes and cryptocurrencies, lest we forget, Ohio recently became the first state to say it would begin accepting Bitcoin for income tax payments. Buckeye State residents can now visit OhioCrypto.com to get started and arrange their payment. This development comes after states like Arizona attempted similar offerings that were ultimately stalled in the legislature.
Considering that most taxpayers seemingly didn’t report crypto gains when Bitcoin and other assets hit their height in 2017, it’s not surprising that few would plan on filing losses from 2018. That said, as LaRoy notes, it’s also likely that these oversights speak to a lack of education among tax preparers. Perhaps as cryptocurrencies continue to become more mainstream, taxpayers will become more accustomed to reporting cryptocurrencies on their taxes and treating them as any other investment.