Short-term vs long-term — the 12-month rule
Hold a position for more than one year and gains get the preferential 0/15/20% LTCG rates. Sell at 11 months and the same gain is taxed as ordinary income — up to 37% federal. On a $100k gain, the difference can be $20,000+.
- • 0% LTCG bracket (2025 single): up to $48,350 of taxable income.
- • 15% LTCG: $48,351 – $533,400.
- • 20% LTCG: above $533,400.
- • Net Investment Income Tax (NIIT): extra 3.8% on investment income above $200k single / $250k MFJ.
Taxable events most people forget
It's not just selling for USD that triggers tax. The IRS has been explicit that any disposition is taxable.
- • Swapping one crypto for another (BTC → ETH).
- • Spending crypto on goods or services.
- • Receiving staking rewards (taxable at FMV when received).
- • Receiving airdrops (taxable at FMV when received and you control it).
- • DeFi liquidity rewards, lending interest, yield farming distributions.
- • Bridging across chains is grey-area; many tax tools treat it as a disposition.
Loss harvesting (and why crypto is special)
Crypto is not currently subject to the wash-sale rule (this may change). You can sell a position at a loss, immediately rebuy, and still claim the loss to offset gains. Capital losses offset capital gains 1:1 and can offset $3,000 of ordinary income per year, with the rest carrying forward indefinitely.
State tax on crypto — usually ordinary income
Most US states tax LTCG as ordinary income (no federal-style preferential rate). California, NY, NJ, OR, MN, HI all hit crypto gains hard. No-income-tax states (FL, TX, NV, WA, WY, SD, AK, TN, NH) leave you with only the federal bill.
FAQ
Do I owe tax if I just hold crypto?
No. Holding (HODLing) is not a taxable event. Tax only triggers on a disposition: sell, swap, spend, or receive new tokens (staking/airdrops).
Does the wash-sale rule apply to crypto?
Currently no — crypto is treated as property, not a security. This makes year-end loss harvesting much more flexible than with stocks. Watch for legislative changes.
How is staking taxed?
As ordinary income at fair market value when you have dominion and control over the rewards. When you later sell those staked tokens, you also owe capital gains on the difference between sale price and the FMV at receipt.
Do I need a crypto tax tool?
If you have more than ~50 transactions across multiple wallets/exchanges, yes. Tools like Koinly, CoinTracker, or TokenTax import from exchanges and produce IRS Form 8949 / 1040 Schedule D.
What if I lost money on crypto?
Capital losses offset capital gains dollar-for-dollar, and up to $3,000 per year of ordinary income. Excess losses carry forward indefinitely. This calculator handles a prior-year loss carryforward input.
Important: this is not tax advice
Calculations use simplified, current published brackets for United States (2025). US estimates layer the selected state's 2025 income tax rate on top of federal — local city taxes (e.g. NYC, Philadelphia) and progressive within-state brackets are not modelled.They do not account for credits, alternative minimum tax, the Net Investment Income Tax, foreign income, R&D credits, or your personal circumstances. Always confirm with a licensed CPA, chartered accountant, or registered tax agent before filing.