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It's considered a capital asset. If your capital losses exceed your capital gains, the excess can be deducted on your tax return and used to reduce other income such as wages, up to an annual limit of $3000, or $1500 if you are married filing separately

dunno how I got that many votes, but I'll take it LOL

They should get a deduction, right? if they claim it

maybe, see my reply to cryptoindex