Can I deduct stolen or scammed crypto on my US taxes?

Not personal ones, in most cases. IRS Publication 547 says that for tax years beginning after 2017, personal casualty and theft losses are deductible only if they're attributable to a federally declared disaster.

That limit was due to end after 2025. Public Law 119-21, signed on 4 July 2025, removed the end date, so it now continues. From 2026 it also allows losses from state-declared disasters, which won't usually help a scam victim.

Because the limit applies to personal-use property. Publication 547 says it does not apply to losses on income-producing property, such as losses from Ponzi-type investment schemes or financial scams. To deduct a scam loss, it lists three conditions:

• —what happened must be theft under the law of the state where it occurred;
• —there must be no reasonable prospect of recovering the money;
• —the loss must arise from a transaction entered into for profit.

IRS Chief Counsel memorandum 202511015, released in March 2025, looked at five scam victims who had reported their losses and been told there was little or no prospect of recovery.

• —Deductible: a victim of a pig-butchering crypto investment scam, a victim of a phishing scam, and a victim of an impersonation scam involving a compromised account. In each case the memo found the money was moved with a profit motive, to invest or to protect investments.
• —Not deductible: the victims of a romance scam and a kidnapping scam, where the memo found there was no profit motive and the loss was a disallowed personal loss.

The memo also found that the deduction is limited to the victim's basis, that the IRS's Ponzi-loss safe harbor didn't apply to these victims, and that the loss belongs to the year the theft was discovered and the victim determined there was no reasonable prospect of recovery. It's advice from the IRS's lawyers on specific facts, not a binding ruling, so your own facts matter.

In the year you discover the theft. Publication 547 says you can deduct theft losses that aren't reimbursable only in the year you discover your property was stolen, and that if there's a claim for reimbursement with a reasonable prospect of recovery, you wait until you can determine with reasonable certainty whether it will be paid.

• —Your police or IC3 report, and any reply saying recovery is unlikely.
• —What you paid for the crypto and when, since the deduction is limited to your basis.
• —The transaction hashes and wallet addresses showing the funds leaving your control.
• —Messages and platform details showing why you sent the money, which is what the profit-motive question turns on.

Take them to a qualified tax professional. Whether a loss qualifies depends on your facts and your state's law, and the rules have changed several times since 2017.

We're forensic examiners, not tax advisers. A Tracewright report documents which transactions were yours and where the funds went, with every transaction hash recorded, which can support the records your tax professional asks for. The intake review is free.