Offsetting crypto losses
Losses are not a consolation prize but an asset — if they are handled properly. Three closed offset pools, a carry-back that opens even final assessments, and a trap that experienced advisers miss.
- Crypto losses can be offset only within their own pool — not against salary, rent or investment income.
- A carry-back to the previous year amends that year's assessment even where it is already final.
- Note: a carry-back removes neither a tax evasion, nor the surcharge under section 398a AO, nor evasion interest.
- Losses have to be declared and determined — otherwise they are lost, even though they genuinely arose.
- A waiver on subsistence grounds is generally ruled out after the Federal Fiscal Court's judgment of 3 March 2026.
Three closed offset pools
Anyone who has suffered crypto losses thinks first of offsetting them against salary. That is precisely what is excluded.
| Losses from | Offset against | Carry-back | Carry-forward |
|---|---|---|---|
| Sec. 23 EStG sales and swaps within the one-year period |
only gains from private disposals | one year | unlimited |
| Sec. 22 no 3 EStG staking, lending, airdrops |
only surpluses from supplies of the same kind | one year | unlimited |
| Sec. 20 EStG derivatives, certain products |
only investment income, in part with further restrictions | no carry-back | unlimited |
A loss from staking rescues no gain from a sale, and vice versa. Anyone with both has to keep both separately — and anyone with only one can use the loss only where it arose.
The other side is the reason the pools exist: because gains are free of tax after the one-year period, the offsetting of losses is restricted in turn. Anyone who wants the exemption has to accept the closed pool.
The carry-back opens even final assessments
A point many consider impossible — and one that decides substantial refunds after a price collapse.
The starting position is typical: substantial gains were taxed in the previous year and the assessment has long been final. In the following year the price collapses, and losses arise on what is economically the same position.
Under section 10d(1) of the Income Tax Act, an assessment already issued for the previous year is to be amended to the extent the loss carry-back is to be granted — even where it has become unappealable. The bar that finality otherwise places on amendment does not apply to this point.
After the price collapse of 2022 we developed this argument, put it to the tax offices and prevailed in almost every case across Germany. The clients concerned received tax back from the earlier year without having to litigate.
What to watch
- The carry-back goes back one year only, and only into the same offset pool.
- For investment income under section 20 EStG there is no carry-back — only a carry-forward.
- The carry-back can be limited in amount or waived entirely. That can make sense where little tax arose in the previous year anyway and the carry-forward is worth more.
- The determination of the remaining carry-forward has to be checked and monitored in the following year. If it is missing from the next assessment, an appeal is called for.
The trap: a carry-back does not remove a tax evasion
The most dangerous misunderstanding in this area — and it arises exactly when something has already gone wrong.
Where the gains of a year went undeclared and are then disclosed, the starting point is an understatement of tax. If the tax is then brought back to zero by a loss carry-back from the following year, one might think the matter is settled.
It is not. For the amount of tax evaded, section 370(4) sentence 3 of the Fiscal Code applies: advantages that could have been claimed on other grounds are left out of account. The amount evaded is therefore measured by the tax attributable to the gains withheld — not by what was ultimately payable.
The surcharge under section 398a of the Fiscal Code is measured by the amount evaded. It can therefore arise even though no tax is payable in the end. Evasion interest under section 235 runs for the period up to the amendment. And the extended ten-year assessment period stays open.
- The belief"the carry-back brought the tax to zero, so there was no loss to the revenue"
- In factthe amount evaded remains the amount of tax understated
- Consequence 1a surcharge under sec. 398a AO can arise
- Consequence 2evasion interest under sec. 235 AO
- Consequence 3the ten-year assessment period stays open
Where a disclosure is in prospect, the carry-back is therefore never the whole answer. The question whether there was intent or recklessness at all decides far more than the carry-back does. Our article on the surcharge (in German)
Managing losses
What can still be steered during the year — and what has to be decided at the turn of the year.
Realise losses deliberately
Where taxable gains are due in the year, realising existing loss positions can neutralise them. The holding can then be rebuilt — with a new holding period, which can cut both ways.
Order and disposal sequence
Which tranche leaves on a partial sale decides gain or loss. With the right documentation this can be steered — within the method chosen and consistently applied.
Keep the thresholds in view
€1,000 for private disposals, €256 for supplies. Both are thresholds: one euro above and the entire amount is taxable. Where the result is close, the detail is worth checking.
Carry back or carry forward
The carry-back brings liquidity at once; the carry-forward may work against a higher rate later. The choice is yours and should be calculated, not made on instinct.
Examine total losses
Platform insolvency, a hack, theft: whether and how this has an effect depends on the category of income. Under section 22 no 3 EStG a claim as income-related expenses may be available. On income-related expenses (in German)
Declare, always
Including in a pure loss year. No return, no determination; no determination, no later offset — and a subsequent determination is only possible to a limited extent once the assessment is final.
Waiver of the tax on subsistence grounds
A constellation that does occur: the tax assessed exceeds what is left to live on after the money that actually flowed out.
The Cologne Tax Court held in 2023 that collection can be inequitable in substance where the tax, taking into account losses that actually flowed out but went unrecognised because of the offset restrictions, exceeds the subsistence minimum that must remain free of tax. That decision attracted considerable attention among advisers.
By judgment of 3 March 2026 (IX R 18/23) the Federal Fiscal Court set aside the Cologne judgment and dismissed the claim. No exception on grounds of substantive equity is to be made to the prohibition on offsetting and deducting losses in section 22 no 3 sentence 3 EStG where real income in the year the loss arose does not suffice to pay the tax assessed. The principle that the subsistence minimum is free of tax does not require outflows from highly speculative transactions to be exempted already in the year they arise; as a matter of constitutional law, offsetting against later gains suffices.
What the senate left open
A door stays slightly ajar. The Federal Fiscal Court expressly recorded that the case decided was not a particularly exceptional case in which offsetting against future gains would be all but excluded — the claimant was in fact able to offset substantial amounts in later years.
For us the consequence is this: where a future offset is realistically out of the question — because the entire holding is lost and no further transactions of that kind are to be expected, for instance — the question is not conclusively settled. Whether the reasoning transfers also depends on the fact that the case decided concerned writing options and option transactions, which the senate expressly classified as highly speculative.
We are not conducting that case. But we make sure affected clients keep legal protection open: an appeal against the assessment, an application for a differing assessment on equitable grounds, and a stay of proceedings where a suitable test case exists. Anyone who lets an assessment become final shares in no future development.
Questions and answers
Can I offset crypto losses against my salary?
Can a final assessment still be amended because of a loss carry-back?
Does a loss carry-back remove a tax evasion?
What does that mean for the surcharge and the interest?
Do I have to declare losses if I am paying no tax?
Can the tax be waived if nothing is left to live on after paying it?
Legal position: 25 August 2026. Sources: sections 10d, 20(6), 22 no 3 sentences 3 and 4, and 23(3) of the Income Tax Act; sections 163, 235, 370(4) sentence 3 and 398a of the Fiscal Code; Federal Fiscal Court, judgment of 3 March 2026 (IX R 18/23), lower court Cologne Tax Court of 26 April 2023 (5 K 1403/21).
The assessment of a remaining exceptional case reflects our own legal view. This article is not advice on an individual case. Where this English text and the German version differ, the German version governs.