Crypto glossary
Tax-loss harvesting
Tax-loss harvesting is selling crypto at a loss to realise that loss for tax purposes and offset capital gains made elsewhere in the same period.
An investor who holds tokens worth less than their cost basis can sell them, record a capital loss and use it to reduce taxable gains from other sales. Unused losses can often be carried forward to future years, within limits set by each country. Many people then buy the same asset back to keep their market exposure, which is where rules differ.
In the US, the wash sale rule blocks loss claims on stocks and securities repurchased within 30 days, but under current law it does not apply to crypto treated as property, so investors have been able to sell and rebuy immediately; proposals to extend the rule to digital assets have been made. In Spain, capital losses in the savings base offset gains in the same base and, within limits, certain capital income, with a four-year carry-forward; the anti-abuse rule in the IRPF law refers to homogeneous securities and shares, and its application to crypto is debated, so a short gap or professional advice is prudent.
Harvesting defers tax rather than erasing it, since the repurchase starts with a lower cost basis.
Example
A Spanish investor has 4,000 euros of gains from selling BTC. In December she sells altcoins bought for 6,000 euros and now worth 2,000, realising a 4,000-euro loss that offsets the gain for the year.