Capital Gains Taxes on Crypto Explained
Key Takeaways
• Cryptocurrencies are taxed as property, triggering capital gains taxes upon disposal.
• Short-term gains are taxed at ordinary income rates, while long-term gains benefit from reduced rates.
• NFT collectibles may face higher tax rates on long-term gains.
• Accurate record-keeping is essential for tax compliance and reporting.
• Recent regulatory changes, including state-level variations, impact crypto tax obligations.
Cryptocurrency investment continues to gain mainstream traction, but with this growth comes greater scrutiny from tax authorities. Understanding how capital gains taxes impact your crypto transactions is essential for any investor or trader seeking to remain compliant and optimize their tax strategy. This article breaks down the fundamentals of crypto capital gains taxes, highlights recent developments, and addresses practical considerations in 2025.
How Crypto Is Taxed
Cryptocurrencies like Bitcoin and Ethereum are classified as property for tax purposes by the IRS and most global tax regulators. This means they are subject to capital gains taxes when disposed of, whether through sale, trade, conversion to fiat, or purchase of goods and services. Any increase in value realized at the point of disposal becomes a taxable event.
For a comprehensive overview, see NerdWallet’s summary on crypto taxes.
Short-Term vs. Long-Term Capital Gains
The amount of tax you pay depends on how long you hold your crypto assets before disposing of them:
- Short-term capital gains: These apply when you dispose of crypto held for one year or less. Profits are taxed at your ordinary income tax rate, which ranges from 10% to 37% depending on your income bracket.
- Long-term capital gains: If you hold your crypto for more than one year, the gains are taxed at reduced rates: 0%, 15%, or 20%, also depending on your taxable income.
The latest thresholds for federal tax rates are detailed on CoinLedger’s tax breakdown.
Examples of Taxable Crypto Activities
You trigger a capital gains tax event whenever you:
- Sell crypto for fiat currency (e.g., USD)
- Swap one cryptocurrency for another (including stablecoins)
- Spend cryptocurrency on goods and services
If your crypto increases in value since you acquired it, you pay tax on the difference between the sale price and your cost basis (original purchase price). For a deeper dive, see Gordon Law’s crypto tax guide.
Special Considerations for NFTs and Collectibles
While most cryptocurrencies follow standard capital gains rules, NFTs deemed collectibles may be taxed at a higher rate — up to 28% on long-term gains. This is an important differentiation for NFT traders and collectors. More details are available in Koinly’s US crypto tax guide.
Tracking, Reporting, and Recent Regulatory Changes
Accurate Record-Keeping
You are responsible for tracking every transaction, including purchase date, amount, sale/disposal date, and fair market value at each event. Many investors use specialized software or hardware wallets to simplify this process and protect their assets from online threats.
Wash Sale Rules & Regulatory Updates
Recent policy debates have focused on whether to extend the wash sale rule to cryptocurrencies, which would prevent investors from immediately repurchasing the same asset after selling at a loss to claim a tax benefit. While no federal law mandates this yet, some states are considering changes. Notably, Missouri is set to become the first state to remove capital gains tax on crypto following new 2025 legislation—a signal of evolving regulatory landscapes. For up-to-date news, see Koinly’s September 2025 tax guide.
Global and Local Variations
Crypto tax policies can vary by jurisdiction. While the IRS federal rules apply across the US, state-level approaches may differ. Internationally, some countries have introduced more favorable regimes, while others maintain strict reporting and higher rates. Investors should consult local guidelines and monitor ongoing legislative proposals.
Simplifying Crypto Tax Management
Managing crypto tax obligations is easier with robust security and clear transaction records. A hardware wallet like OneKey not only safeguards your digital assets from online threats but also provides tools to track activity and export transaction histories for easier tax reporting. For active traders and long-term investors alike, this dual focus on security and compliance is indispensable.
Conclusion
Tax compliance in crypto is no longer optional as regulatory pressure increases worldwide. By staying informed about capital gains rules, maintaining precise records, and utilizing secure tools, investors can both protect their wealth and avoid unwanted surprises at tax time.
For those seeking both top-tier security and streamlined record-keeping, OneKey hardware wallet is an excellent choice to manage assets and simplify your annual crypto tax process.
