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Bitcoin Vs. Stocks: Which Is More Tax Efficient Investment?

Shehan Chandrasekera, CPA

Jun 22, 2020 • 3 MIN READ

This post was originally posted on Forbes by Shehan Chandrasekera on May 19th, 2020

Investing in bitcoin is often hotly debated compared to other investments like gold or the S&P 500. An often overlooked, but hugely important factor in comparing returns is the tax impact of investing in these different types of assets.

From a tax perspective, bitcoin has a significant edge compared to stocks. It allows you to harvest tax losses more aggressively than stocks leading to higher savings, which you can reinvest in your portfolio.

No Difference In Capital Gains

When it comes to capital gains, there is no difference in taxes between bitcoin gains and stock gains. Cryptocurrencies like bitcoin are treated as “property” per the IRS Notice 2014-21. If you are holding bitcoin as an investment, they are subject to the same capital gain taxes just like stocks and securities.

Capital Losses: Bitcoin Offers More Frequent Tax Loss Harvesting

Bitcoin offers a significant advantage when it comes to harvesting losses because it is treated as “property” and not subject to the wash sale rule like stocks and securities.

Any investment portfolio — regardless of whether it is composed of bitcoin, stocks, or anything else — goes through ups and downs. When your portfolio is in the red (i.e. when the market value is less than what you invested) you can actually benefit by selling the investment to harvest tax losses. Tax losses can reduce your overall tax bill so those savings can then be reinvested to further grow the value of your portfolio. Therefore, the more frequently you can harvest tax losses without facing any restrictions, the more savings you can generate which can be reinvested in your portfolio.

Bitcoin allows you to harvest tax losses more frequently than stocks, leading to more theoretical savings. Since bitcoins are treated as property (as opposed to stocks) they are not subject to the wash sale rule. The wash sale rule prohibits claiming losses on stocks or securities that are sold at a loss and then a “substantially identical” stock or security is repurchased in the 30 day period before or after the initial disposal. Since bitcoin is treated as property however, you do not have to wait 30 days to harvest losses.


Assume David buys $10,000 of Google stock (10 shares at $1,000 each) on January 10, 2020. On January 15, 2020, Google stock is trading at a much lower price of $600 per share. If he were to sell his position and buy another 10 shares at $600 per share, he would not be able to claim the capital loss of $4,000 (($1,000 – $600) x 10) due to the wash sale rule. Therefore, the $4,000 loss is disallowed by the wash sale rule.

If David substituted Google stock with bitcoin, he could claim this loss without being subject to the wash sale rule. As a matter of fact, he could harvest these losses every time his portfolio goes in the red. CoinTracker allows you to do this automatically.


One caveat to keep in mind is that continuous tax loss harvesting while bypassing the 30 day window is neither explicitly permitted nor denied under the current guidance related to crypto. Since §1091 is directed towards only “stock and securities” (not property) you could argue that cryptocurrencies are exempt from wash sale rules. With that said, abusive practices may be subject to substance over form argument resulting in disallowance of losses.

Although it may sound counterintuitive, loss harvesting is good for your portfolio which inevitably goes through ups and downs. Therefore, in the Bitcoin vs. Stocks battle, bitcoin clearly wins when it comes to tax treatment.

Feedback or questions? Reach out to us on Twitter @CoinTracker

Disclaimer: this post is informational only and is not intended as tax or investment advice. For tax or investment advice, please consult a professional.


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