Cryptocurrencies such as Bitcoin and Ethereum enjoy great popularity as a means of payment as well as an investment. At the same time, however, losses can also occur when investing in various coins. They result from the sale of the cryptocurrencies at a price that is below the acquisition cost. Corresponding losses from cryptocurrencies can be offset against positive income (profits) under the conditions of § 23 EStG.

First principle: How do losses arise from cryptocurrencies?

Losses from cryptocurrencies regularly result from the sale at a price that is below the initial cost at that time. Unlike real estate, for example, cryptocurrencies are not among the usable assets. Provisions on the depreciation of assets, as they apply in particular with § 7 EStG, therefore do not apply to Bitcoin and Co. They cannot cause loss either.

Ongoing losses can, however, occur in so-called lending, i.e. the transfer of cryptocurrencies to third parties. This income falls under § 22 no. 3 EStG, whereby the advertising costs are to be deducted from the income in the calculation. If the expenses exceed the income, negative other income arises in the sense of tax law. They are not subject to general loss offsetting, but can only be offset against positive income of the preceding or subsequent assessment periods (§ 22 no. 3 sentence 3 and 4 EStG).

The Federal Ministry of Finance (BMF) makes a comprehensive statement on these and many other questions in the letter of 10.05.2022. Accordingly, cryptocurrencies are considered “other economic goods” within the meaning of § 23 (1) sentence 1 number 2 EStG. Profits and losses on the sale are therefore either tax-insignificant or, by analogy with real estate, are to be taken into account in the tax assessment.

Private Losses on the Sale of Cryptocurrencies and Tokens

For losses from cryptocurrencies arising from the sale of corresponding coins, a distinction must be made between two types of use of the corresponding currency: