For unlucky crypto investors looking to turn lemons into lemonade – it looks like digital assets lost in theft or hack could potentially be declared a tax loss, as long as you live in the right country, said experts at Cointelegraph.

After the announcement that more than 8,000 Solana wallets have been compromised and about 8 million dollars in cryptocurrencies were stolen due to a security breach in wallet provider Web3 Slope’s network, this could be some much-needed solace.

The Solana Hack and Possible Tax Consequences: A Thread https://t.co/JnYMrkB8qJ

– Crypto Tax Calculator (@CryptoTaxHQ) August 3, 2022

The Solana hack and its possible tax consequences: a thread https://t.co/JnYMrkB8qJ

— Crypto Tax Calculators (@CryptoTaxHQ) August 3, 2022

In correspondence with Cointelegraph, Shane Brunette, CEO of Australia-based CryptoTaxCalculator, confirmed that the loss of cryptocurrencies through hacking or theft may be declared a loss for tax purposes in certain jurisdictions.

“This means the original amount you paid for the asset(s) can be used to offset other capital gains.”

When asked if similar provisions exist in tax jurisdictions other than Australia, the country where tax software provider Brunette is based, replied:

“Many countries have a provision allowing these types of tax deductions […] however, you should work closely with a local tax professional and ensure you provide adequate proof of loss.

Danny Talwar, tax manager at Koinly, confirmed the same with Cointelegraph, pointing out, however, that in Australia you have to prove that the lost cryptocurrency was under your control at the time it was stolen.

“To claim capital loss for hacked cryptocurrency, you will need to prove to the Australian Tax Office (ATO) that the cryptocurrency was lost and was under your control.”

Talwar also said that it is essential that the tax authorities have sufficient evidence that the cryptocurrency is unrecoverable, suggesting the use of blockchain mining tools like Etherscan and Solscan to legitimize evidence on the address. of the hacker’s destination – which can also provide evidence of a large data set. of hacked funds.

Under Australian tax laws, any evidence of hacking must also include the dates the private keys were acquired or lost and any associated wallet addresses.

Unfortunately, for US-based cryptocurrency investors, reporting hacked cryptocurrency as a tax loss is no longer possible due to tax reform introduced in 2017, according to a blog post by CryptoTaxCalculator.

For those living in the UK and Canada, things are a bit more complicated, but a tax loss claim is possible if investors are prepared to follow the unique steps set out by each country’s tax office.

Around $2.6 billion in digital assets have been lost to hackers and malicious actors this year alone, with chain bridge attacks representing 69% of the total value lost.

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