Crypto Capital Gains Tax: Short-Term vs. Long-Term

When you sell, trade, or spend cryptocurrency for more than it cost you, the profit is a capital gain — and how long you held the coin decides your tax rate. Hold for one year or less and you pay short-term rates (your ordinary income tax bracket); hold longer than a year and you qualify for lower long-term rates.

Why crypto triggers capital gains at all

The IRS treats cryptocurrency as property, not currency. That means nearly every disposal is a taxable event that produces a gain or loss, just like selling a stock. If you want the full picture of what counts as a taxable event, start with our guide on how cryptocurrency is taxed.

Common disposals that create a capital gain or loss include:

• Selling crypto for US dollars.
• Trading one coin for another (for example, ETH for SOL) — the trade is a sale of the first coin.
• Spending crypto to buy goods or services.

Simply buying crypto and holding it, or moving it between your own wallets, is not a taxable event. Note that earning crypto — from staking, mining, airdrops, or as payment — is taxed as ordinary income when you receive it, not as a capital gain. Selling that crypto later is a separate capital-gains event. See how staking rewards are taxed for the details.

Short-term vs. long-term: the one-year line

The holding period is measured from the day after you acquired the asset through the day you dispose of it.

• Short-term: held one year or less. Taxed at your ordinary income rate, which for 2026 ranges from 10% to 37%.
• Long-term: held more than one year. Taxed at preferential rates of 0%, 15%, or 20%, depending on your taxable income.

That gap is significant. A high earner could pay 37% on a short-term gain versus 20% on the same gain held just past the one-year mark. Higher-income taxpayers may also owe an additional 3.8% Net Investment Income Tax on top of either rate.

How the gain is calculated

Your capital gain is simply proceeds minus cost basis:

• Cost basis — what you paid to acquire the crypto, including fees.
• Proceeds — the fair market value you received when you disposed of it.

Beginning with the 2025 tax year, the IRS requires per-wallet (account-by-account) cost basis tracking rather than a single universal pool across all your accounts. In practice, this means each exchange account and wallet keeps its own basis lots, so where a coin sits when you sell it matters for which basis you use.

Reporting and Form 1099-DA

You report capital gains and losses on Form 8949 and summarize them on Schedule D of your Form 1040. Each disposal is a line: the asset, dates acquired and sold, proceeds, basis, and gain or loss.

Starting with the 2025 tax year, US custodial exchanges began issuing Form 1099-DA to report your gross proceeds from digital-asset sales. This is the same kind of information return you already get for stocks. Expect these forms to arrive in early 2026 for 2025 activity — but treat them as a starting point, not gospel. Basis reporting is being phased in, and self-custody and DeFi activity generally won't appear on any 1099. You are still responsible for reporting everything accurately. For a look at what one major exchange sends, see our Coinbase tax documents guide.

Using losses to lower your bill

Capital losses are valuable. They first offset capital gains of the same type, then across types, and any net loss beyond that can offset up to $3,000 of ordinary income per year, with the remainder carried forward to future years.

Because crypto is property rather than a security, the wash-sale rule that applies to stocks has not historically applied — a nuance that has made tax-loss harvesting a popular strategy. Rules can change, so confirm the current treatment before acting. Our tax strategy hub covers harvesting and holding-period planning in more depth.

Quick summary

The takeaway: track your acquisition dates carefully, and where it fits your goals, holding past the one-year mark can meaningfully cut what you owe. For more foundational guides, browse the crypto tax basics hub.

This article is general information, not tax advice. Consult a qualified professional about your specific situation.