How to Report a Crypto Loss From a Stolen Ledger Wallet in IRS Form 8949

If your Ledger wallet was stolen, you may wonder how to report the lost crypto on your tax return. Here’s what the IRS allows—and doesn’t.

Can You Claim a Theft Loss for Crypto?

Since the 2017 Tax Cuts and Jobs Act (TCJA), personal theft losses are no longer deductible unless they are tied to a federally declared disaster. Unfortunately, this means most crypto stolen from personal wallets like Ledger devices is not directly deductible as a theft loss.

What Can You Do Instead?

While the IRS doesn’t allow claiming stolen crypto as a theft loss on Schedule A, there’s an alternative. If you can prove the cryptocurrency is permanently unrecoverable, you may be able to classify it as an investment loss on IRS Form 8949 as if it were sold for $0.

How to Report on IRS Form 8949

1. Go to IRS Form 8949, Part I or II depending on how long you held the asset (short-term or long-term).
2. Enter a description such as “Stolen Bitcoin from Ledger Wallet – unrecoverable”.
3. Enter the date acquired and the date of theft (or date you determined the loss).
4. In the Proceeds column, write “$0”.
5. In the Cost Basis column, enter the original purchase amount.
6. Use Code “C” in the adjustment column and include the explanation “Wallet theft – asset permanently lost”.

Important Tips

• Keep detailed records: acquisition dates, cost basis, and police or support reports.
• Consult a crypto-savvy tax professional before filing.
• Don’t try to claim a loss if there’s any chance of recovery or reimbursement (e.g., from insurance or legal action).

FAQs

Stolen crypto may not qualify as a tax-deductible theft, but with accurate records and IRS Form 8949, you can still reflect the loss on your return. When in doubt, always consult a qualified tax advisor.