Crypto tax: capital gains vs income

Crypto can be taxed in two ways. When you dispose of it, you have a capital gain or loss. When you receive it as payment or as a reward, you have income. This page uses United States rules. Other countries differ, and it is education, not tax advice.

Side by side

Capital gains

The US tax authority treats digital assets as property. So each time you dispose of crypto, you compare what you got with what it cost you, including fees.

Swapping one crypto for another counts, even though no dollars are involved. So does swapping a stablecoin.

How long you held it matters. A gain on crypto held for more than one year is long-term and is usually taxed at a lower rate. Lesson 57 covers the sums.

Income

Crypto you receive for work, from staking or mining, or from a hard fork is income at its value on the day you receive it. That is true even if you never sell.

The income is fixed on that day. If the price falls afterwards, the income does not shrink.

When both apply

Crypto you receive as income goes through both, one after the other.

1. You receive a staking reward worth $300. You have $300 of income, and $300 becomes your cost basis.
2. Months later you sell it for $250. You have a $50 capital loss.

You are taxed on the value when it arrived, then on the change since.

What is neither

• Buying crypto with dollars and holding it.
• Moving crypto between wallets you own.
• Receiving a genuine gift. Tax arises when you dispose of it.

Lesson 60 covers the cases the rules do not yet settle, such as DeFi deposits and liquid staking.