Solana crypto hack, could be written off as a tax loss according to some.
According to tax experts, U.S. investors will lose out on the opportunity to claim hacked cryptocurrency as a tax loss, while Australian, Canadian, and U.K. crypto investors may be able to do so.
It turns out that digital assets lost during an attack or hack might potentially be claimed as a tax loss, providing you live in the proper nation, for unlucky crypto investors trying to turn lemons into lemonade.
This may be some much-needed solace in the wake of the announcement that more than 8,000 Solana wallets had been accessed and that an estimated $8 million in cryptocurrency had been stolen due to a security breach in Web3 wallet provider Slope’s network.
The Solana hack, and it’s possible tax consequences: A thread 🧵 https://t.co/JnYMrkB8qJ
— Crypto Tax Calculator (@CryptoTaxHQ) August 3, 2022
Shane Brunette, the CEO of the Australian company CryptoTaxCalculator, stated that in some countries, crypto lost due to a hack or exploit could be reported as a loss for tax purposes.
“This means the original amount you paid for the asset(s) can be used to offset other capital gains.”
When questioned if comparable rules apply in tax jurisdictions other than Australia, the nation where the company that makes tax software is situated, Brunette responded:
“Many countries have a provision to allow for these types of tax deductions […] however, you should work closely with a local tax professional and make sure you keep adequate proof of the loss.”
The same was corroborated by Danny Talwar, Head of Tax at Koinly, who stressed that in Australia, one must provide proof that the stolen cryptocurrency was in their possession at the time it was taken.
“To claim a capital loss for hacked crypto, you’ll need to demonstrate evidence to the Australian Tax Office (ATO) that the crypto is lost and it was under your control.”
Talwar added that it was crucial for the tax authority to have sufficient proof that cryptocurrency was irretrievably lost. He advised using blockchain explorer tools like Etherscan and Solscan to gather reliable proof of the hacker’s destination address, which may also show that a sizable amount of stolen money was involved.
Any proof of a hack must also include the corresponding wallet addresses, as well as the dates when the private keys were obtained or lost, according to Australian tax legislation.
According to a blog post by CryptoTaxCalculator, according to the tax change passed in 2017, U.S.-based cryptocurrency investors can no longer claim stolen cryptocurrency as a tax loss, which is sad news given the recent Solana crypto hack.
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