Cryptocurrency Tax-Loss Harvesting Wash Sales

Cryptocurrency tax-loss harvesting wash sales risk retroactive penalties that outweigh any claimed losses. Unlike traditional securities, the IRS currently permits immediate wash repurchases, but proposed 2026 legislation threatens to close this loophole. Traders who harvested losses in 2023 could face amended return obligations and an average penalty of 20% on disallowed losses. This strategy ranks below #9's 'Overfunding a Whole Life Insurance Policy' for sheer unpredictability.