Hey everyone, I need some advice regarding crypto taxes because I find myself in a bit of a dilemma. I’m a dual citizen living in Texas, and earlier this year (in January or February), I invested $25,000 of my own money into Coinbase. I bought Solana (or XLM) and transferred it to my own wallets and other platforms outside of Coinbase.
Since then, things haven’t been going well. My investment has dropped in value, and now I’m sitting at around $17,000. I need to pull out $3,000 soon for personal reasons, but I’m worried about the potential tax implications if I send $3,000 worth of Solana back to Coinbase and cash it out.
Here’s where I get confused: My overall investment has decreased. I put in $25,000, and now I have less than that. So, logically, there should be no taxable gains here. However, I know the IRS has specific rules about crypto transactions, treating each trade as a taxable event. Still, it doesn’t feel right to pay taxes on money I didn’t make.
Adding another layer, I used a Binance International account under my other citizenship to make trades. I no longer have funds on Binance, but I know the IRS requires U.S. taxpayers to report worldwide income. The problem is that tracking every transaction across various platforms, wallets, and exchanges feels incredibly burdensome, especially when the outcome is a loss overall.
I’ve spoken to other traders, and their approach is to track the total in versus total out—only paying taxes on any amount they withdrew over what they initially deposited. For me, that means if I deposited $25,000 and withdrew $30,000, I should pay taxes on that $5,000 gain. But in my case, since I’m at a loss, I feel like there shouldn’t be any taxes due.
I want to be clear: I’m not trying to avoid taxes. I just don’t see the logic in paying taxes on something where I’ve lost money. It seems unreasonable to me, and if the IRS were to question it, I don’t know what they’d expect me to pay taxes on. I know compliance is key, but tracking down hundreds of transactions to show I’ve lost money just feels like a waste of time and effort.
What are your thoughts? Does my approach seem reasonable, or am I missing something important here? I’d appreciate any advice or input from people who might have gone through a similar situation.
TL;DR: I invested $25,000 in crypto, and now it’s worth around $17,000. I need to pull out $3,000, but I’m confused about taxes because I’m overall at a loss. I used Binance International under my other citizenship, and tracking every transaction feels unreasonable. Should I be worried about paying taxes when I haven’t made a profit?
submitted by /u/AboodyVevo
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