We had money in a BlockFi account, which went bankrupt at the end of 2022. How can we deduct that loss on our 2022 tax return?

  • 1
    Look at Schedule D and Line 7 of the 1040. You can only deduct $3000/year. Any amount above that carries over to subsequent years.
    – RonJohn
    Mar 12 at 19:44

1 Answer 1


You may want to consider consulting a tax attorney for this. This is, for the most part, new territory with a lot of gray area in the tax code.

You can claim worthless securities as a loss on your Schedule D/Form 8949, but a few issues might come into play here.

  1. BlockFi filing for bankruptcy doesn't necessarily mean your holdings are worthless. Until there's a final determination of recovery, your holdings may just be locked up and illiquid, but not worthless.
  2. Your holdings are presumably not BlockFi stock or debt, but cryptoassets and USD deposits, which further blurs the line of when your holdings are considered worthless - BlockFi stock itself becoming worthless doesn't necessarily mean that the deposits and holdings are also worthless.
  3. Writing off worthless securities is irrevocable - you can't get any money for securities you claim as worthless in the future. "To abandon a security, you must permanently surrender and relinquish all rights in the security and receive no consideration in exchange for it." (IRS Pub. 550, "Worthless Securities")
  4. Neither the IRS nor the SEC sees cryptoassets as securities, and the worthless securities provision could be interpreted as only applying to securities (this is not tax or legal advice - CPAs and tax attorneys will take various stances).
  • if they are not securities then under what regime are cryptoasset gains taxed?
    – user253751
    Mar 13 at 19:07
  • Could you "sell" the asset for, say 1cent, to someone?
    – ghellquist
    Mar 13 at 19:08
  • @user253751 all gains, even for non-security personal assets, are taxed (barring exemptions). Sell your home for a profit and you're taxed at capital gains rates. Sell artwork or other collectibles and it's the 28% collectibles rate. Crypto, presumably, is capital in nature and would be taxed at capital gains rates (short or long depending on holding period).
    – Stan H
    Mar 13 at 19:29
  • @ghellquist possibly. In this case, it might have to be some sort of forward contract if the assets are locked up and non-transferable until a settlement is reached. There can be weird rules around taxes on forward contracts too. In the case of "normal" worthless securities, you can sometimes get your brokerage firm to buy the shares for a tiny amount so you can lock it in as a sale.
    – Stan H
    Mar 13 at 19:33
  • @StanH and losses do not give tax breaks?
    – user253751
    Mar 13 at 19:46

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