No tax authority publishes a harvesting strategy, and this site does not recommend one. It carries what authorities wrote. What can be set out honestly is the small set of published rules any such strategy rests on, and the two places where the IRS guidance read here stops short and a filer is on their own.
Rule one: a disposal is what creates the loss
Every loss sentence in the virtual currency FAQ hangs off a sale or an exchange. Q4 recognises a capital gain or loss on a sale; Q16 does the same when virtual currency held as a capital asset is exchanged for other property, another virtual currency included; Q14 covers paying for a service with it. Nothing in the FAQ attaches a loss to a fall in value that has not been realised.
Rule two: the holding period is fixed to the day
Q6 sets the boundary. One year or less between acquisition and disposal is short-term; more than a year is long-term. The period begins the day after acquisition and ends on the day of the sale or exchange. Short-term and long-term are the categories the FAQ itself distinguishes, and it states no rate for either, pointing instead to Publication 544.
Rule three: the deduction is limited, in words the FAQ does not expand
The qualification in Q4, “subject to any limitations on the deductibility of capital losses”, is the whole of what the page says about limits. It is a reference, not a rule, and it points to Publication 544. Anyone sizing a harvest against ordinary income is working from a document this site has not read and does not quote.
Rule four: which units you sold is settled, whether you repurchase or not
A39 lets you choose the units disposed of where you can specifically identify them and substantiate your basis in them; A41 makes the default first in, first out from the earliest acquired. Those answers govern a sale followed by a repurchase as much as any other. What the FAQ does not do is disallow anything: neither IRS page read here uses the words wash sale, and that absence is recorded with the page named.
Questions people ask about tax loss harvesting crypto
Does the IRS publish anything about tax loss harvesting?
Not on the pages read here. Harvesting is a strategy rather than a treatment, so it would be unusual if it did. What the FAQ publishes are the underlying rules: when a loss is recognised, how the holding period runs, and that deductibility is limited.
Can a loss be harvested on a token I have not sold?
The FAQ ties every loss to a sale or exchange, so on the guidance read here the answer is not available without a disposal. Nothing on those pages addresses an unrealised loss.
Does buying back immediately change anything?
It does not change which units the FAQ deems sold: A39 allows specific identification with substantiation, and A41 defaults to first in, first out. Whether a repurchase disallows a loss is not addressed on either IRS page read here, and this site records that rather than answering it.
Where does a harvested loss get reported?
Q43 routes capital transactions to Form 8949 and summarises capital gains and deductible capital losses on Form 1040 Schedule D. Ordinary income from mining, staking or forks is separate, on Schedule 1.