Friday, December 8, 2023

Crypto assets lost in hacking incidents can be claimed as tax loss: Experts.

Digital assets lost during hacking incidents or exploits can potentially be claimed as a tax loss, say experts but one has to be living in the “right country”. Experts are looking into this as more than 8,000 Solana wallets have been compromised and around $8 million in crypto stolen due to a security breach in Slope’s network.

Shane Brunette, the CEO of CryptoTaxCalculator, says crypto lost in a hack or exploit could be declared as a loss for tax purposes in certain jurisdictions. He highlighted that the original amount an investor paid for the assets can be used to offset other capital gains. Australia has such provisions and this is where CryptoTaxCalculator is headquartered. Brunette said many countries have a provision to allow these types of tax deductions. He believes investors should work closely with their local tax professionals and make sure that they keep adequate proof of the loss.

Danny Talwar, head of tax at Koinly, added that investors in Australia must show evidence that the crypto lost was under their control at the time it was stolen. He said investors need to show evidence to the Australian Tax Office that the asset is stolen and it was under their control. Talwar pointed out that it was critical that the tax authority has enough evidence that crypto is unretrievable. This brings to light blockchain explorer tools like Etherscan and Solscan to legitimate evidence on the destination address of the hacker. These tools provide proof of a large pool of hacked funds.

In Australia, evidence of a hack also needs to contain dates highlighting when private keys were acquired or lost, as well as the associated wallet addresses. For US-based crypto investors, claiming hacked crypto assets as a tax loss is no longer applicable because of the 2017 tax reform. Investors in the United Kingdom and Canada also have it a bit complicated. Tax loss claims can be made if investors are willing to go through some unique steps set out by the respective country’s taxation office.

Cryptured Team
Cryptured Team
The writers team at is composed of passionate and experienced journalists who cover the latest developments in the crypto and blockchain space. They aim to provide accurate, unbiased and easy-to-understand news and information for their readers, as well as insights and analysis from industry experts. The writers team is always on the lookout for new and exciting stories that can help the general public learn more about the potential and challenges of these technologies.

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