How to report stolen cryptocurrency on your taxes in 2026

Dealing with stolen cryptocurrency is bad enough without having to worry about how it’ll affect your taxes. The tax rules for lost or stolen crypto vary by country, and even within one region, the outcome often depends on exactly how the loss happened.

This guide explains how to report stolen cryptocurrency on your taxes in the United States and outlines which situations may qualify for deductions. A qualified tax professional can also help you review your losses and prepare the documentation you’ll need.

5 ways to lose crypto and their tax implications

Each type of crypto or non-fungible token (NFT) loss has its own rules, and the tax outcome depends on how the event happened and how you held the asset.

Here are five common scenarios and whether you can claim each on your cryptocurrency taxes. A normal sale or exchange of crypto can create a capital gain or loss on Form 8949 and Schedule D. For the broader rules on reporting crypto losses, start with our full guide. The situations below are different because they usually involve lost access, theft, scams, or bankruptcy instead of a standard disposition. Keep in mind that tax law is fact-specific, so these are general rules. Consult a tax professional about your specific situation.

1. Lost crypto or NFTs

Digital assets are usually personal losses when you lose access to them without a sale, exchange, or theft event. Common examples include:

• Lost private key or seed phrase
• Damaged hard drive
• Broken phone
• Corrupted hardware wallet
• Transaction accidentally sent to the wrong address

These events usually do not create a deductible tax loss because the IRS does not treat lost access or accidental destruction as a sale or exchange. Hacks, wallet drains, and scams are different fact patterns and should be analyzed under the theft-loss rules below.

2. Stolen crypto or NFTs

Theft means someone took your crypto without permission through hacking, a compromised wallet, or unauthorized access to an exchange account. A theft loss may be deductible if the crypto was connected to a trade, business, or transaction entered into for profit, the taking qualifies as theft under applicable law, you discovered the loss during the tax year, and there is no reasonable prospect of recovery.

Personal theft losses are generally not deductible for individuals unless they are connected to a federally declared or state-declared disaster, subject to the personal casualty loss rules. That exception rarely applies to crypto theft.

3. Crypto or NFT scams

Crypto scams are situations where you’re tricked into transferring crypto. Here are some examples:

• Phishing attacks
• Spoofed websites
• Fake customer support emails
• Impersonation scams
• Rug pulls
• Fraudulent investment platforms
• Pump-and-dump schemes
• Pig butchering schemes
• Cloned exchange platforms
• Ponzi schemes
• Romance scams

Personal scams generally are not deductible. A scam may be different if the transaction was entered into for profit and the facts satisfy the theft-loss rules.

The CCA 202511015 explains that some investment scams may support a theft-loss deduction if the taxpayer entered the transaction for profit, the scam qualifies as theft under applicable law, the loss was discovered during the tax year, and there was no reasonable prospect of recovery. The deductible amount is generally based on your tax basis, not the amount the scammer promised you.

4. Bankruptcy

Bankruptcy means your crypto is tied up inside a failed exchange or lending platform. Even if withdrawals are frozen, you generally cannot claim a loss right away.

The tax treatment depends on what legally happened to your claim: you may need to wait for the bankruptcy process, determine whether the claim became wholly worthless, evaluate whether nonbusiness bad-debt treatment applies, or determine whether a narrow theft or Ponzi safe harbor rule applies. The Ponzi safe harbor is limited to specific fact patterns and should not be treated as a general rule for exchange failures.

5. Misappropriation

Misappropriation happens when a custodian holding your funds wrongfully uses them. For example, an exchange may:

• Mix customer assets with corporate funds
• Lend funds out without consent
• Use deposits to cover losses

This type of event is considered a breach of trust, and it is often prosecuted as fraud or embezzlement. Misappropriation may support a theft-loss position if the facts satisfy the theft-loss rules, including a profit motive, theft under applicable law, discovery during the tax year, and no reasonable prospect of recovery.

Can stolen crypto be traced?

Crypto transactions can’t be reversed in most cases, because once the transfer goes through, the blockchain locks it in. There’s no central authority you can call and no support team that can stop the payment.

However, while the chance of getting your crypto back is slim, stolen assets can be traced. Blockchains are public, and every transaction leaves a trail. If that trail leads to a centralized exchange, law enforcement may be able to request records from the platform. Centralized exchanges often collect customer identity information, but recovery still depends on the facts, the exchange, and the investigation.

What should I do if I get scammed or robbed?

If you lose your crypto to a scam or theft, you should act quickly. Full fund recovery is rare, but taking the right steps helps investigators trace the crypto and may support your tax return records.

Here is how to report stolen cryptocurrency and prepare for what happens next.

Report the issue

Start by reporting the incident to the platform involved. Many exchanges have internal teams that review suspicious activity. Report the incident to the platform, but do not rely on the exchange report alone. You should also file your own report with law enforcement or the relevant cybercrime agency.

You should also file a report with the local police and national cybercrime agencies. In the U.S., this includes the FBI’s Internet Crime Complaint Center portal. When you make a report, it creates an official record you can use for legal purposes and crypto taxes.

Document everything

Next, build your case by documenting everything. This includes details like wallet addresses, transaction IDs, emails, messages, screenshots, and website links. Good documentation creates a timeline of events and helps investigators understand your case. For tax purposes, the IRS often requires proof of theft, criminal intent, and inability to recover assets.

Prevent future losses

Scammers often target the same people and accounts more than once. They will use the information they have on you to try to enter all associated accounts you own. So in the case of theft, you should move your remaining funds to a new wallet, reset passwords, and turn on two-factor authentication where possible.

Can I write off lost cryptocurrency?

Under current law, personal casualty losses are generally deductible only when connected to a federally declared or state-declared disaster, subject to the personal casualty loss rules. Losing a seed phrase, misplacing a hardware wallet, or sending crypto to the wrong address usually does not meet that standard.

And even in that rare case, investors still generally cannot claim a capital gain or loss. The IRS does not treat lost access or accidental destruction as a sale or exchange, because those events do not involve a disposition that realizes gain or loss.

Can I write off stolen cryptocurrency?

Personal crypto theft losses are generally not deductible for individuals unless a narrow disaster-related exception applies. A theft connected to a trade, business, or profit-motivated transaction may be different, but only if the facts satisfy the theft-loss rules.

Will I be taxed on lost or stolen cryptocurrency?

You do not pay taxes when your crypto is lost or stolen, since those events do not create income and are not treated as sales. You should keep the event in your tax records even if it does not appear as a deductible loss on your return. Save all proof, such as transaction IDs, screenshots, police reports, or messages with the exchange.

These records show why the asset is no longer in your wallet. Documentation also matters if the platform enters bankruptcy, you later receive a distribution, or you recover funds after claiming a deduction. The tax result depends on your basis, whether you previously claimed a loss, and the form of the recovery.

When can I write off taxes after a scam?

For scam tokens or failed assets, the tax result usually depends on whether you sold or exchanged the asset, whether it became wholly worthless, or whether you took an affirmative abandonment step. These are separate rules.

• Disposed assets: Many scam tokens still trade for a small amount, which means they are not considered worthless. As long as they have some value or liquidity, you usually need to sell or trade them to close your position and realize the loss.
• Worthless or abandoned assets: A token is not deductible just because its value dropped sharply. If it can still be sold or exchanged, even for a small amount, you generally need that disposition to realize a capital loss. If there is no real market and you permanently discard the asset, such as by sending it to a null or burn address, you may have an abandonment loss if you held the asset for profit and can show both intent to abandon it and an affirmative act of abandonment.

How can I write off taxes after a bankruptcy?

When a crypto platform enters bankruptcy, you generally cannot claim a loss right away just because withdrawals are frozen. In many cases, you still have a claim in the bankruptcy, so the tax result depends on whether that claim is later resolved, partially repaid, or becomes wholly worthless.

A bankrupt exchange can raise several different tax paths, including a creditor claim, nonbusiness bad debt, theft-loss treatment, Ponzi safe harbor treatment in limited cases, or no current deduction at all. If you receive part of your funds back, that recovery usually reduces the amount of any potential deduction rather than creating an immediate full write-off. For a deeper breakdown of those rules, see CoinTracker’s guide to reporting losses related to bankrupt exchanges.

How do I report stolen cryptocurrency on my taxes? 6 steps

Reporting stolen crypto on your taxes is mostly about keeping your records organized and accurate. Here are the steps to follow.

1. Determine whether there was a sale or exchange

Stolen crypto usually is not a sale or exchange, so it usually does not create a capital loss on Form 8949. If you sold, swapped, or otherwise disposed of a token, report that separate disposition under the normal capital gain or loss rules.

2. Double-check current tax laws

Under current IRS guidance, personal theft losses are generally not deductible unless they are tied to a federally declared disaster. Losses from profit-motivated transactions may be different, so review the rules carefully before claiming a deduction.

3. Document the theft

Keep a log of the event, and include the following information:

• Date, including the day of the theft and the day you found out
• Wallets and/or exchanges involved
• Token amounts
• Description of the event and documentation such as screenshots and emails from the exchange

4. Don’t report the theft as a sale

The loss is not a sale, so do not report it as one. Some tax software allows you to label the asset as lost or stolen so it no longer appears in future gains calculations.

5. Complete additional forms if applicable

In most personal crypto theft cases, you do not need to file an additional loss form because the loss is not deductible.

If your stolen crypto qualifies as a deductible theft loss, you generally report it on IRS Form 4684. If you sold or exchanged crypto and realized a capital loss, report that transaction on Form 8949 and Schedule D. If a worthless asset qualifies for abandonment treatment, the loss may instead be reported on Form 4797. These forms apply to different tax events, and deductible theft losses usually benefit individual taxpayers only if they itemize.

6. Consult a tax professional

Crypto loss tax rules are complex, often situation-dependent, and subject to exceptions for business and investment cases. A qualified tax expert can review your documentation, confirm how to report the loss correctly, and even help you legally lower taxes on your crypto activity.

Take control of your crypto taxes with CoinTracker

Reporting stolen crypto correctly is mostly a documentation problem. You need every wallet, every transaction, and every cost basis record intact, even for the coins that are gone, so the report you file matches what actually happened.

CoinTracker imports your transaction history from your exchanges and wallets, helps you keep cost basis records organized, and lets you label lost, stolen, or scammed transactions so they do not appear as taxable sales.

If you are handling an FTX, Celsius, or BlockFi claim, CoinTracker helps preserve the basis and timing records you and your tax professional need to evaluate the bankruptcy, bad-debt, theft-loss, or safe harbor treatment that may apply.

Three million crypto users file with CoinTracker. Start with a free CoinTracker account.

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

FAQ

Is cyber theft tax-deductible?

Usually, no. Personal cyber theft is generally not deductible unless a narrow disaster-related exception applies. A theft connected to a trade, business, or profit-motivated transaction may be deductible if it satisfies the theft-loss rules.

Can I deduct losses from FTX, Celsius, or BlockFi?

Maybe, but not just because the platform entered bankruptcy. If you still have a claim in the bankruptcy or expect distributions, you generally cannot deduct the full loss yet. Depending on the facts, the analysis may involve nonbusiness bad debt, theft-loss treatment, limited Ponzi safe harbor treatment, or no current deduction at all.

Can I claim a loss for a token that went to zero?

Usually, you need a sale or exchange to claim a capital loss. A token is not worthless for tax purposes if it still trades for any nonzero amount. If there is no viable market and you permanently discard the asset, such as by sending it to a burn address, abandonment treatment may apply.

What's the difference between Form 4684 and Schedule D for crypto losses?

Form 4684 is for deductible casualty and theft losses. Form 8949 and Schedule D are for sales or exchanges that create capital gains or losses. Stolen crypto is usually not reported as a sale, but selling a near-worthless token to close the position generally goes through Form 8949 and Schedule D.

Can the IRS track your cryptocurrency?

Blockchain transactions are public, so the IRS can usually track your cryptocurrency. This is especially true if the crypto reaches a centralized exchange, where it may be possible to identify the person or account holding your crypto.

Do crypto exchanges refund stolen money?

Crypto exchanges do not typically have built-in refunds, and blockchain transactions are final and irreversible. The only chance to get stolen funds back is if an exchange recovers the crypto and chooses to compensate its users, or if law enforcement seizes the stolen crypto and returns it after an investigation.