Crypto Losses Count Only When Sold: Germany's Tax Law

Crypto investors who hold onto assets that have lost value may be missing out on tax benefits. According to German income tax law, a loss is only recognized for tax purposes when a crypto asset is sold or disposed of.

This means that even if an investment has fallen 98% in value, it's not considered a loss until the sale occurs. The tax office will initially see no change in value, regardless of the price drop or market activity.

The one-year holding period is also crucial, as gains and losses are only taxable after this period has passed. If an asset is sold at a gain within 12 months, it's not taxed. Similarly, if it's sold at a loss within 12 months, the loss isn't recognized for tax purposes.

Crypto assets can be offset against other gains in private disposal transactions, but only up to the amount of the gain made in the same calendar year. Losses that exceed this threshold can be carried forward to future years or back to the previous year through Section 10d.