If you make a loss trading crypto assets (cryptocurrency), the current system does not let you offset that loss against next year's profit (a carry-forward deduction) or deduct it from salary or stock gains (loss offsetting). This is because crypto profit is classified as miscellaneous income, and under the Income Tax Act a loss from miscellaneous income cannot be offset against other income and has no provision for carrying it forward to the next year. Within the same year, however, a loss on one coin is offset against a gain on another coin as part of the miscellaneous-income calculation.
Based on the National Tax Agency's 'Tax Treatment of Crypto Assets, etc.: FAQ' (NTA FAQ) and its Tax Answer pages, this article sets out the current rules, then explains the separate self-assessment taxation (20%) and 3-year loss carry-forward deduction set out in the Outline of the FY2026 (Reiwa 8) Tax Reform (approved by the Cabinet on 26 December 2025) — including when it takes effect and whether coins handled on overseas exchanges (MEXC, BingX, etc.) would qualify — based on publications available as of 22 September 2026.
Crypto losses cannot be carried forward (current rules) — how a miscellaneous-income loss is treated
Under the Income Tax Act, only losses arising from four categories of income — real estate income, business income, forestry income and capital gains (transfer income) — can be offset against other income (Tax Answer No. 2250, current as of 1 April 2026 (Reiwa 8)). Because profit from crypto-asset trading is classified in principle as miscellaneous income (other miscellaneous income), a loss from crypto-asset trading cannot be deducted from other income such as salary income (NTA FAQ 2-11; Income Tax Act Article 69).
As for carrying a loss forward to later years, there is a 3-year carry-forward deduction for losses from the transfer of listed shares and similar securities and for FX losses (miscellaneous income, etc. relating to futures transactions), but no such system exists for crypto-asset miscellaneous income. In other words, if you make a ¥1,000,000 loss on crypto in one year and a ¥1,000,000 profit the next year, the entire ¥1,000,000 profit in the second year is taxed as that year's income, and the previous year's loss cannot be used.
| What you want to offset against | Allowed? | Basis |
|---|---|---|
| Profit on a different crypto asset in the same year (e.g. a BTC loss and an ETH gain) | Yes | Income and expenses are combined within the same miscellaneous-income calculation |
| Profit from crypto-asset futures (margin trading) in the same year | Yes | Crypto-asset margin trading is also miscellaneous income under aggregate taxation (FAQ 2-12) |
| Other miscellaneous income in the same year (manuscript fees, affiliate income, etc.) | Yes | The amount of miscellaneous income is calculated across all miscellaneous income combined |
| Salary income, business income, real estate income | No | A miscellaneous-income loss cannot be deducted from other income (No. 2250; FAQ 2-11) |
| Gains from selling listed shares or investment trusts (separate self-assessment taxation) | No | Cannot be offset against income taxed separately |
| FX (foreign exchange margin trading) profit (separate self-assessment taxation) | No | FX is taxed separately under the special treatment for miscellaneous income, etc. relating to futures transactions, while crypto is taxed under aggregate taxation (FAQ 2-12) |
| Crypto profit in a later year (carry-forward deduction) | No | There is no provision for carrying forward a miscellaneous-income loss |
※ The rows marked 'Yes' mean the loss is offset as a result of being calculated together within the same year's miscellaneous income. Even if miscellaneous income as a whole ends up negative, that negative amount cannot be deducted from other income, and it cannot be carried forward to the next year either.
If your income (proceeds) from crypto-asset transactions in a year exceeds ¥3,000,000 and you keep the required books and records, the profit is in principle classified as business income (FAQ 2-2, updated December 2025 (Reiwa 7)). A business-income loss is eligible for loss offsetting, and if you file a blue return, the carry-forward deduction for a net operating loss also becomes relevant. However, even with books and records, cases where profit-seeking intent is not recognised, among others, are judged case by case, so anyone this might apply to should consult a tax accountant.
Realising an unrealised loss within the year lets you offset it against that year's profit
Since carrying forward is not possible, a loss can only be offset against profit within the 'same year'. If you have already realised a profit during the year but continue holding a coin with an unrealised loss past 31 December, realising that loss in a later year cannot be offset against the previous year's profit. If you sell and realise the loss within the year, it can be deducted from that year's profit when calculating income.
| Case | That year's income | Next year's income |
|---|---|---|
| Realised +¥1,000,000 on BTC; sold the ETH position with a −¥600,000 unrealised loss within the year | ¥400,000 | If ETH is bought back and sold the following year, that gain or loss is calculated as next year's income |
| Realised +¥1,000,000 on BTC; sold the ETH position with a −¥600,000 unrealised loss in January of the following year | ¥1,000,000 | −¥600,000 (lost if there is no other profit to offset it against; cannot be carried forward to the year after that either) |
※ This example does not take necessary expenses into account. Whether to buy back the same coin after selling is an investment decision that should factor in price movements and fees.
A crypto-to-crypto exchange on an overseas exchange (e.g. ETH → USDT) also realises a loss, because you are treated as having disposed of the ETH at the point of the exchange (FAQ 1-3). It is not the case that 'no loss arises unless you convert back to yen'. A loss on futures (margin trading) can also be offset against spot profit in the same year (FAQ 2-12).
8 ways to reduce crypto tax legally: when a gain becomes taxable →
After separate taxation: a 3-year carry-forward deduction — what's in the Outline of the FY2026 Tax Reform
The Outline of the FY2026 (Reiwa 8) Tax Reform published by the Ministry of Finance (approved by the Cabinet on 26 December 2025) states that, on the premise of amendments to the Financial Instruments and Exchange Act and related laws, the tax treatment of crypto assets will be revised as follows.
| Item | Content of the Outline |
|---|---|
| Scope | The transfer, etc. of 'specified crypto assets' (limited to crypto assets, etc. registered on the financial instruments business operators' register) that a resident, etc. carries out with a 'person conducting crypto-asset trading business (tentative name)' |
| Tax rate | 20% (15% income tax + 5% individual resident tax), separate from other income |
| Loss carry-forward deduction | Of a loss arising from the transfer, etc. of specified crypto assets, the amount that cannot be deducted from that year's transfer income, etc. relating to specified crypto assets may, subject to certain requirements, be carried forward and deducted from transfer income, etc. relating to specified crypto assets for each of the following 3 years |
| Derivatives | Miscellaneous income, etc. from crypto-asset derivative transactions relating to specified crypto assets is added to the scope of the special taxation treatment for miscellaneous income, etc. relating to futures transactions (separate self-assessment taxation) and the loss carry-forward deduction |
| Reporting | A person conducting crypto-asset trading business must submit a report stating the name, address, individual number and the type of crypto asset, etc. of each resident, etc. who traded, to the district director of the tax office by 31 January of the following year |
| Crypto assets outside the scope | For crypto assets giving rise to transfer income under aggregate taxation, the special deduction for transfer income and the one-half taxation for long-term holdings do not apply, and a loss is not eligible for offsetting against other income under aggregate taxation |
| When it applies | The tax rate and the carry-forward deduction (① and ③ above) apply to transfers, etc. of specified crypto assets carried out on or after 1 January of the year following the year in which the amended law takes effect (the 'application start date'). Reporting applies to transactions on or after 1 January of the year following the year that contains the application start date |
※ Source: Ministry of Finance, 'Outline of the FY2026 (Reiwa 8) Tax Reform', Individual Income Taxation (2). The amended Financial Instruments and Exchange Act was enacted on 15 July 2026, and, as covered in another article on this site, application is expected to begin on 1 January 2028 at the earliest.
If this is enacted as set out in the Outline, a loss arising from the transfer, etc. of specified crypto assets on or after the application start date will become deductible from transfer income, etc. relating to specified crypto assets for each of the following 3 years. This would bring crypto assets the same 'losses can be carried forward for 3 years' mechanism that already applies to shares and FX, but the following three points are not yet settled, or need care, as of now.
- A loss from before the application start date cannot be brought in: the Outline states that it applies to transfers, etc. on or after the application start date, and there is no provision for carrying forward under the new system a loss already realised in an earlier year, or an unrealised loss held at the time of transition
- Coverage is limited to 'specified crypto assets': the scope is crypto assets, etc. registered on the financial instruments business operators' register, and whether a coin handled only on overseas exchanges qualifies will depend on the contents of the register and how it is operated after the law takes effect
- Continuous filing is likely to be required for the carry-forward deduction: as with the carry-forward deduction for share transfer losses and for FX, 'certain requirements' are attached, and it is thought that filing a return every year from the year of the loss onward will be a condition (details await the publication of the law and notices)
What to do in a year you make a loss
In a year with no profit there is no obligation to file an income tax return, but it is advisable to keep the following records for future years.
- Download your transaction history (spot, futures, deposits/withdrawals, fees) by year and save it together with the yen-conversion rates used. Overseas exchanges do not issue annual transaction reports, and if the acquisition cost becomes unknown, only an amount equivalent to 5% of the sale price is allowed as the acquisition cost (FAQ 2-7)
- Calculate your holding quantity and valuation (using the total average method or the moving average method) as of the end of the year. The cost-of-disposal calculation for the following year starts from the 'balance at the start of the year' (FAQ 2-4)
- If this is the first year you acquired crypto assets, consider filing a notification of your valuation method (the total average method applies if no notification is filed; NTA A1-20)
- Even in a loss year, if you have other miscellaneous income (such as side-business income), it can be offset, so calculate across all miscellaneous income together
This article is general information based on National Tax Agency and Ministry of Finance publications as of 22 September 2026, and is not individual tax advice. The content of the tax reform will be finalised through the promulgation of the bill and law and through National Tax Agency notices. For a specific decision, consult a tax accountant or your local tax office.
Frequently asked questions
Q. Can crypto losses be carried forward to the next year?
A. Under the current system, no. Crypto profit is classified as miscellaneous income, and there is no provision for carrying forward a miscellaneous-income loss to later years. The 3-year carry-forward deduction available for share transfer losses and FX losses does not apply to crypto assets.
Q. Can I offset crypto losses against my salary income?
A. No. Only losses from real estate income, business income, forestry income and transfer income can be offset against other income (Tax Answer No. 2250); a miscellaneous-income loss cannot be deducted from other income such as salary income (NTA FAQ 2-11).
Q. Can I offset crypto losses against profit from shares or FX?
A. No. Gains from selling listed shares and FX profit are taxed under separate self-assessment taxation, and cannot be offset against crypto gains or losses, which are miscellaneous income under aggregate taxation. Crypto margin trading (futures) is also taxed under aggregate taxation, unlike FX, so it cannot be offset against FX profit either (FAQ 2-12).
Q. If I made a profit on a different crypto asset in the same year, can it be offset?
A. Yes. Because crypto gains and losses are calculated together within miscellaneous income, a BTC loss and an ETH gain in the same year, a spot loss and a futures gain, and a crypto loss and other miscellaneous income (such as side-business income) are all offset as a result. However, any amount by which miscellaneous income as a whole ends up negative cannot be deducted from other income, and cannot be carried forward to the next year either.
Q. If crypto moves to separate taxation, will losses be able to be carried forward for 3 years?
A. The Outline of the FY2026 (Reiwa 8) Tax Reform states that a loss from the transfer, etc. of specified crypto assets subject to separate self-assessment taxation (20%) will be eligible for a carry-forward deduction within the following 3 years. It applies to transfers, etc. on or after 1 January of the year following the year the amended law takes effect, expected on 1 January 2028 at the earliest. There is no provision for bringing in a loss from before the application start date.
Q. Do coins traded on overseas exchanges also qualify for separate taxation and the carry-forward deduction?
A. The Outline limits the scope to 'specified crypto assets' (crypto assets, etc. registered on the financial instruments business operators' register), and whether a coin handled only on overseas exchanges qualifies depends on the contents of the register and how it is operated after the law takes effect. As of 22 September 2026, this is not yet settled.
Q. Should I sell a crypto asset that has an unrealised loss before the year ends?
A. For tax purposes, realising the loss by selling within the year lets you offset it against that year's profit, while carrying it over to the next year means it can no longer be offset. Whether to sell, however, is an investment decision that should take into account price movements, fees, and whether you plan to buy the position back afterwards. This site does not provide trading recommendations.
Sources
- National Tax Agency (Japan) | Tax treatment of crypto assets, etc.: FAQ, last revised December 2025 (PDF, Japanese) →
- National Tax Agency | Tax Answer No. 2250 Offsetting profits and losses (law as of 1 April 2026; Japanese) →
- Ministry of Finance | Outline of the FY2026 (Reiwa 8) Tax Reform, approved by Cabinet on 26 December 2025 (PDF, Japanese): review of the taxation of crypto assets →
- FSA | Explanatory material on the bill amending the FIEA and the Payment Services Act (April 2026, PDF, Japanese) →
- Daiwa Institute of Research | 20% separate taxation for crypto-asset transactions (6 February 2026, Japanese) →
- National Tax Agency | A1-20 Notification of the valuation method for crypto assets (income tax; total-average method applies if no notification; Japanese) →
FX Textbook is an independent information site, not an exchange or a provider of personal investment advice. Crypto-asset trading involves risk: price volatility, liquidation of leveraged positions, transfer mistakes and the operational risk of exchanges and service providers can cause you to lose some or all of your invested capital. No result is guaranteed.
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