Taxes & RegulationIntermediate

Short-Term vs Long-Term Crypto Capital Gains: How the IRS Splits Them

Short-term crypto gains are taxed at ordinary income rates and long-term gains at capital gains rates, with the IRS cutoff at a one-year holding period.

Vahe HakobyanEditor-in-chief Updated Oct 6, 20263 min readFact-checked

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Short-term versus long-term crypto gains Which crypto events are taxable How staking and mining income works What records and IRS forms you need FAQ

Key takeaways

Each unit of crypto has its own holding period.
Selling, swapping, or spending crypto can trigger a gain.
Staking and mining rewards count as income when received.
Your return must separate short-term and long-term disposals.

Short answer

Short-term crypto gains face ordinary income rates, and long-term gains get preferential capital gains rates. The cutoff is a holding period of one year or less for short-term and more than one year for long-term.

Short term vs long term crypto capital gains turns on how long you held the asset before selling or exchanging it. The IRS treats crypto as property, so a sale is short-term at one year or less and long-term beyond that, and each unit you buy runs its own clock.

Short-term versus long-term crypto gains

A sale is short-term if you held the asset for one year or less, and long-term if you held it longer. The holding period starts the day after you acquire the asset and ends on the day you sell or exchange it. The two categories are taxed at different rates.

Short-term versus long-term crypto gains
Criterion	Short term	Long term
Holding period	One year or less	More than one year
Tax rate	Ordinary income rates	Preferential capital gains rates
Period start	Day after acquisition	Day after acquisition

Which crypto events are taxable

Selling, swapping, or spending crypto is a disposition, whether your holding period is short or long. Buying with US dollars, holding, and moving crypto between wallets you control are not taxable events, though a transfer fee paid in crypto is reportable. Gain or loss is what you received minus your cost basis, in US dollars.

Selling crypto for dollars
Swapping one crypto for another
Spending crypto on goods or services
Paying a transfer fee in crypto

How staking and mining income works

Staking and mining rewards are ordinary income on the day you receive them, valued in US dollars. That value becomes your cost basis, so a sale within a year is short-term and a later sale is long-term. An airdrop from a hard fork is income too.

What records and IRS forms you need

Keep records of every purchase, income receipt, sale, exchange, and other disposition. Your return must report each disposal and separate short-term from long-term ones, even if it produced no gain or loss. Form 1040 asks a digital asset question, and buying and holding alone does not require a yes answer.

Purchase date and cost in US dollars
Date and proceeds of each sale or swap
Value of income when you received it
A short-term or long-term label for each disposal

Frequently asked questions

Losses first offset gains of the same category, short-term against short-term and long-term against long-term. Any leftover loss then offsets the other category, and the deduction against ordinary income is capped.

A gift usually carries over the donor's holding period, so your clock does not restart. Crypto you inherit is treated as long-term when you sell it.

If your records identify which units you sold, that choice sets their term. Otherwise the default is first in, first out.

Usually yes. An NFT held as an investment is property, so the one-year cutoff applies.

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Written byVahe HakobyanVahe Hakobyan is the editor-in-chief of World-Crypt. He covers bitcoin, markets and regulation, and leads the newsroom that fact-checks every story before it goes live.