Can you offset crypto losses against gains in Israel?

In brief

What it offsets

A capital gain or real-estate gain on any asset, not only digital ones

Order of the offset

First against the real capital gain

An unused loss

Carries forward to later years, against capital gains only

Condition for carrying forward

A return filed for the tax year of the loss

Carrying back to earlier years

Not possible

Income that is not a capital gain

Not offset against a crypto loss

Which gains can the loss be offset against?

According to the Tax Authority’s Q&A, a capital loss on selling a digital asset as an investment can be offset against a capital gain or real-estate gain on selling another asset, not necessarily a digital one, all under section 92 of the Income Tax Ordinance.

Section 92(a)(1) provides that the loss is offset first against the real capital gain, that is, the gain after removing the part that comes from the rise in the Consumer Price Index.

A fall in the value of a coin you still hold is not a loss to offset. A loss arises only on a sale.

What happens to a loss that is not used?

Under section 92(b), a loss that cannot be offset in the tax year it arose carries forward to the following tax years, one after another, and is offset in them against capital gains only, provided a return was filed with the assessing officer for the tax year of the loss.

So the annual return filed for a losing year is what preserves the loss for the years after it. Losses carried forward from earlier years are reported on Form 1344, attached to the annual return.

The law allows a loss to be carried only to the years after it, never back to the years before it.

What cannot be offset this way?

The wider offset against interest and dividends in section 92(a)(4) applies only to a loss on selling a security. So a loss on selling a digital coin does not reduce income such as mining income or employment income.

The Ordinance has a separate rule for a loss on selling an asset outside Israel, which is offset first against capital gains outside Israel. In a 2024 report the State Comptroller noted that where a digital asset is located is unclear, so where the amounts are significant it is worth consulting a tax advisor or accountant on this point.

Where the activity amounts to a business, its income is classified as ordinary income rather than a capital gain, and the rules above, written for capital losses, do not apply to it.

How does Crypto Tax offset losses?

Crypto Tax automatically offsets the tax year’s capital losses against its capital gains, after separating out the inflationary part using the Consumer Price Index.

A loss balance from the previous year is carried forward automatically from that year’s report generated in Crypto Tax and offset against the year’s gain, and the report shows the balance left to carry into the next year. Losses from a year with no report generated in Crypto Tax, or from selling assets other than crypto, are not included in the calculation, and are offset in the annual return.

Sources

• Digital assets Q&A, Israel Tax Authority (opens in a new tab)
• Income Tax Ordinance [New Version], section 92, Israel Tax Authority (opens in a new tab)
• Annual tax report 2025 for individuals, forms 1301 and 1344, Israel Tax Authority (opens in a new tab)
• State Comptroller, report 75A (2024) - taxation of digital currencies (opens in a new tab)