Crypto Capital Gains Tax Explained: Short-Term vs Long-Term Rates
In the US, cryptocurrency sold after being held for one year or less is generally taxed at ordinary income tax rates (up to 37% federally for top brackets), while crypto held for more than one year typically qualifies for long-term capital gains rates (0%, 15%, or 20% federally, depending on income). The gap between short-term and long-term treatment can exceed 17 percentage points for some filers.
The one-year line
The holding-period clock starts the day after you acquire an asset and includes the day you sell it. Selling even one day before the one-year mark can push a gain into short-term (higher) tax treatment instead of long-term.
Why this matters more in crypto than in stocks
Because crypto is more volatile, investors are statistically more likely to buy and sell within a single year chasing short-term price swings — which means a larger share of crypto gains, in practice, get taxed at the less favorable short-term rate compared to typical long-term stock holdings.
How this factors into a real-return calculation
The Crypto Reality Check lets you set your own estimated tax rate specifically so you can model the difference — try running the same holding period once at a short-term-equivalent rate (e.g., 24%) and again at a long-term rate (e.g., 15%) to see how much of a difference the holding period alone makes to your real, after-tax outcome.
Frequently asked questions
Does this apply outside the US?
Tax treatment varies significantly by country. This article describes general US federal rules; consult a local tax professional for your jurisdiction.
Is this tax advice?
No. This is general educational information only. Consult a licensed tax professional for advice specific to your situation.