Crypto Taxes: Property Rules, Not a Special Exemption
The IRS treats cryptocurrency as property, not as currency β which means every sale, trade, or purchase made with crypto is a taxable event calculated exactly like selling stock or real estate. There is no special crypto-only exemption or discount; your gain or loss is simply the sale price minus your cost basis, and the tax rate depends entirely on how long you held the asset. Hold for more than a year and your gain qualifies for the lower long-term capital gains rate (0%, 15%, or 20% depending on your income). Sell within a year of buying, and the entire gain is taxed at your ordinary income tax rate instead, which can be more than double the long-term rate for higher earners. Every taxable crypto event β including trading one coin for another, not just cashing out to dollars β must be tracked and reported, making detailed transaction records essential.
How Crypto Gains Are Taxed
| Holding Period | Tax Treatment |
|---|---|
| 1 year or less | Ordinary income tax rate (10%β37%) |
| More than 1 year | Long-term capital gains rate (0%, 15%, or 20%) |
| Sold at a loss | No tax; loss may offset other gains |
Losses can offset capital gains dollar-for-dollar, and up to $3,000 of any remaining loss can offset ordinary income each year, with the rest carried forward β keeping accurate cost-basis records across every wallet and exchange makes this much easier at tax time.
Frequently Asked Questions
As property β gains and losses are calculated the same way as with stock, with no separate crypto exemption.
Short-term gains are taxed at your ordinary income tax rate, which is often higher than the long-term rate.
No tax is owed, and the loss may offset other gains or up to $3,000 of ordinary income per year.
β» Estimate only. Every crypto-to-crypto trade is also a taxable event β consult a tax professional for full reporting requirements.