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What are capital gains on crypto?
A capital gain is the profit when you sell or swap an asset for more than its cost basis — what you paid, including fees. Selling for less produces a capital loss. In the US, the IRS treats crypto as property, so these rules apply to it.
What it means for you
In the US, how long you held a coin sets the treatment: one year or less is short-term, taxed at ordinary income rates; more than one year is long-term, taxed at lower rates. Net capital losses offset gains, only a limited amount can be deducted against other income each year, and the rest carries forward to later years.
How it works
Gain or loss is the amount received minus adjusted basis, and basis includes fees, commissions and other acquisition costs in US dollars. The holding period starts the day after you acquire the asset. Short-term gains are taxed at graduated ordinary rates; long-term gains get rates of 0, 15 or 20 percent depending on taxable income, with higher maximum rates for some categories such as collectibles. Gains and losses are netted against each other; a net capital loss can be deducted against other income only up to an annual limit, and any excess carries forward indefinitely.
An example
Say you buy a coin for $2,000 including fees and sell it 18 months later for $3,000. In the US that is a $1,000 long-term capital gain. Sell the same coin after 10 months instead, and the $1,000 is short-term and taxed at your ordinary income rate.
Sources: IRS: Frequently asked questions on virtual currency transactions, IRS Topic 409: Capital gains and losses · checked 4 October 2026
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