Can I deduct lost or stolen cryptocurrency on my taxes in 2025?

Unfortunately, under current tax law, deducting lost or stolen cryptocurrency is extremely limited for individual taxpayers.

The TCJA limitation: The Tax Cuts and Jobs Act suspended the personal casualty and theft loss deduction for tax years 2018 through 2025, except for losses attributable to a federally declared disaster. Since crypto theft, exchange hacks, and lost wallet keys are not federally declared disasters, these losses are generally not deductible for individual taxpayers during this period.

Possible exceptions and workarounds:

• Exchange bankruptcy (Celsius, FTX, BlockFi): If an exchange files bankruptcy and you lose access to funds, this may be treated as a worthless investment/bad debt (Section 166) or an investment loss. You may need to wait until the bankruptcy proceedings determine that the funds are truly unrecoverable. Claim the loss on Form 8949 and Schedule D when the asset becomes provably worthless.
• Abandoned property: You may be able to claim a loss by abandoning a worthless crypto position. This requires documentation that the asset has zero value and you have permanently relinquished all rights. The IRS has not provided clear guidance on how to abandon crypto.
• Business losses: If you held crypto as a business asset (not personal investment), theft and casualty losses may still be deductible as a business expense on Schedule C.

Rug pulls and scams: If you invested in a fraudulent crypto project (rug pull), this is technically a theft loss and falls under the TCJA suspension. Some taxpayers have tried to treat it as a worthless security (Section 165(g)), which may be arguable if the token traded on an exchange.

After 2025: If the TCJA provisions expire, the personal theft loss deduction may return for the 2026 tax year, potentially allowing deductions for crypto theft and losses (subject to a $100 floor per event and 10% AGI threshold).