IANAL, I'm not a tax expert, but I believe you can deduct losses when converting to/from fiat currency (US dollars). Which is where taxation would take effect.
If you invested $10k in crypto mining equipment, you can deduct that investment (over 5 years or something similar), you then successfully mine 5 coins. These coins are/were worth whatever exchange rate you could get. Until you use/exchange them, you aren't taxed. If you buy something, you need to declare the value of what you bought and pay income taxes against it. If you exchange it for currency, you need to pay taxes on that currency.
If you bought $25k worth of BTC, and it fell from $25k to $6k, then you turn it back into USD, you can take a deduction on the losses too. This is how most interactions with futures/stocks works. However the tax rates, triggers and rules are more tightly regulated than straight/regular income. If you're operating under a corporation or llc, again the rules may be different still.
Having a tax lawyer and accountant is probaly prudent if you're talking about 5+ figure transactions over a given tax year.
edit: --- based on responses below, I'm probably wrong about mined coins, and you probably have to pay taxes on the value when mined. Again, I'm not a lawyer/accountant, so if you're in a position where you're talking about a significant amount of money, get professional advice.
If you invested $10k in crypto mining equipment, you can deduct that investment (over 5 years or something similar), you then successfully mine 5 coins. These coins are/were worth whatever exchange rate you could get. Until you use/exchange them, you aren't taxed. If you buy something, you need to declare the value of what you bought and pay income taxes against it. If you exchange it for currency, you need to pay taxes on that currency.
If you bought $25k worth of BTC, and it fell from $25k to $6k, then you turn it back into USD, you can take a deduction on the losses too. This is how most interactions with futures/stocks works. However the tax rates, triggers and rules are more tightly regulated than straight/regular income. If you're operating under a corporation or llc, again the rules may be different still.
Having a tax lawyer and accountant is probaly prudent if you're talking about 5+ figure transactions over a given tax year.
edit: --- based on responses below, I'm probably wrong about mined coins, and you probably have to pay taxes on the value when mined. Again, I'm not a lawyer/accountant, so if you're in a position where you're talking about a significant amount of money, get professional advice.