Everything you need to know about cryptocurrency taxes, with free calculators
Last Updated: December 2024 | Tax Year 2024-2025
1. Crypto Tax Basics
Cryptocurrency is treated as property by most tax authorities, not as currency. This means every time you sell, trade, or spend crypto, you may trigger a taxable event.
Key Principle: You owe taxes on the difference between what you paid for crypto (cost basis) and what you received when you disposed of it (proceeds).
The tax you pay depends on:
How long you held it: Short-term (<1 year) vs long-term (>1 year)
Your income bracket: Higher income = higher tax rates
The type of transaction: Sale, trade, gift, or payment
2. What Triggers a Taxable Event?
Taxable Events (You Owe Taxes)
Selling crypto for fiat: Selling BTC for USD
Trading crypto for crypto: Swapping ETH for SOL
Spending crypto: Buying goods/services with crypto
Receiving crypto as income: Mining, staking rewards, airdrops
Non-Taxable Events (No Tax Due)
Buying crypto with fiat: Just purchasing doesn't trigger tax
Holding crypto: No tax until you sell/trade
Transferring between your own wallets: Moving crypto you own
Gifting crypto (up to limits): Gift tax exemptions apply
Warning: Many people don't realize that crypto-to-crypto trades are taxable. Swapping Bitcoin for Ethereum triggers capital gains tax on the Bitcoin you "sold."
3. Understanding Capital Gains
Capital gains are calculated as:
Capital Gain = Sale Price - Cost Basis
Short-Term vs Long-Term
Holding Period
Classification
Tax Rate
Less than 1 year
Short-term capital gains
Ordinary income rates (10-37%)
More than 1 year
Long-term capital gains
Preferential rates (0%, 15%, or 20%)
Pro Tip: If you're close to the 1-year mark, consider waiting to sell. The difference between short-term and long-term rates can be significant (e.g., 37% vs 20%).
Calculate Your Capital Gains
Use our free calculator to estimate your crypto tax liability with FIFO or LIFO methods.
When you've bought the same crypto at different prices over time, you need to decide which coins you're "selling" first. This is called your cost basis method.
FIFO (First In, First Out)
The coins you bought first are sold first. This is the default method and often results in:
Higher gains in a rising market (you sell old cheap coins)
More long-term gains (older coins held >1 year)
LIFO (Last In, First Out)
The coins you bought most recently are sold first. This often results in:
Lower gains in a rising market (you sell recent expensive coins)
More short-term gains (recent purchases <1 year)
Example
You bought:
1 BTC at $20,000 (January 2023)
1 BTC at $40,000 (June 2024)
You sell 1 BTC for $50,000:
Method
Cost Basis
Capital Gain
FIFO
$20,000 (Jan 2023 coin)
$30,000 (long-term)
LIFO
$40,000 (June 2024 coin)
$10,000 (short-term)
Which is better? It depends on your situation. LIFO can reduce immediate gains, but FIFO may give you favorable long-term rates. Use our calculator to compare both.
5. Tax Loss Harvesting
Tax loss harvesting is a strategy where you sell losing positions to realize capital losses. These losses can:
Offset capital gains: Reduce your taxable gains dollar-for-dollar
Offset ordinary income: Up to $3,000 per year
Carry forward: Unused losses roll over to future years
Deadline Alert: You must complete tax loss harvesting transactions by December 31 for them to count in that tax year. After January 1, it's too late!
How It Works
Identify underwater positions (current value < cost basis)
Sell before December 31
Lock in the loss for tax purposes
Optionally rebuy after 30 days (wash sale considerations)
Crypto Advantage: Unlike stocks, crypto is currently not subject to wash sale rules in most jurisdictions. You can sell and immediately rebuy without losing the tax benefit. (Note: Laws may change, consult a tax professional.)
Calculate Your Tax Savings
Find out how much you could save by harvesting losses before December 31.