What is a capital loss on Bitcoin?
A capital loss arises when you sell Bitcoin for less than you bought it for.
The Finnish Tax Administration deducts the loss first from capital gains in the same year and then from other capital income (Finnish Tax Administration).
Any part not deducted carries forward and can be deducted over the following five years.
The opposite of a loss, a Bitcoin capital gain, is calculated on the same principle but as taxable income.
How are Bitcoin losses deducted in practice?
- Calculate the gain or loss on each sale separately. Keep accurate records of all trades.
- Report gains and losses in MyTax (OmaVero). If you report the whole year at once, fill in separate calculations for profitable and loss-making sales and attach a breakdown of all sales.
- The Tax Administration makes the deduction. The loss is deducted first from capital gains, then from other capital income, and the rest carries forward for the next five years.
When can't a Bitcoin loss be deducted?
- Small disposals. A loss is not deductible if both the total sale prices and the total acquisition costs of all property sold during the year are no more than €1,000 (Finnish Tax Administration, in Finnish).
- Lost crypto. Crypto lost in a scam, in the bankruptcy of a crypto service or because of a lost wallet cannot be deducted (Taxation of crypto-assets, section 2.15, in Finnish).
- CFD contracts. Gains from CFD trading are capital income, but losses are not taken into account in taxation at all (Finnish Tax Administration).
- Paper losses. A fall in value without a sale is not a deductible loss.
What to keep in mind
- Keep all transaction details. Purchase and sale dates, prices and the services used.
- Check the annual report from your exchange. It doesn't always cover everything, especially if you have used several services.
- Contact a tax professional if needed. Especially with more extensive trading.
Why realising a loss sometimes makes sense
Some investors deliberately use a so-called tax-loss harvesting strategy: a loss-making position is sold before the end of the year so that the loss can be deducted from the same year's gains, and if desired a similar position can be bought back later.
This is a completely legal strategy, but it should be planned carefully, because market timing affects the outcome.
Realised loss vs. paper loss
It is important to distinguish between a realised loss and a so-called paper loss.
If the value of your Bitcoin has fallen but you haven't sold, it is only an unrealised fall in value with no tax effect. A deductible loss arises only when you actually sell or swap the Bitcoin.
| Paper loss | Realised loss | |
|---|---|---|
| Has it been sold? | No | Yes |
| Deductible in taxation? | No | Yes (but not for small disposals under €1,000) |
Deducting Bitcoin losses in Finland: frequently asked questions
Can a Bitcoin loss be deducted from gains on other assets?
Yes. The loss is deducted first from all capital gains in the same year, such as gains on shares, and then from other capital income (Finnish Tax Administration).
Is an undeducted loss lost if it isn't used right away?
No. If the loss cannot be fully deducted in the same year, the remaining part carries forward and can be deducted over the following five years as capital gains or other capital income arise.
Should I realise a loss just for the tax benefit?
The tax benefit is only one factor in the decision. Also consider your own view of Bitcoin's long-term development, not just the short-term tax effect.
This content is general information, not personal tax advice.