What is capital gains?

The profit or loss from selling an asset for more or less than you paid, which is what most tax systems charge on a crypto disposal.

The word "selling" is doing more work than most people expect. In the United States the IRS treats digital assets as property rather than currency, so trading one coin for another, spending crypto on goods or services, and paying a fee in crypto are all disposals that produce a gain or loss (source: IRS digital assets guidance). Only buying and holding is free of it.

The expensive misunderstanding is believing that a coin-for-coin trade is invisible because no dollars moved. It is a disposal at fair market value on the day it happened, and the gain is denominated in your home currency whether or not you ever saw one.

How it works

A gain is the disposal proceeds minus your cost basis, which is normally what you paid plus acquisition fees. A loss is the same subtraction with a negative answer.

Holding period decides the rate. The IRS treats a gain as long-term when the asset was held more than one year before disposal and short-term at one year or less, and long-term gains are taxed at 0, 15, or 20 percent depending on taxable income (source: IRS Topic 409). Short-term gains are taxed as ordinary income.

Losses offset gains first. If losses exceed gains, the IRS allows up to 3,000 dollars of net capital loss against ordinary income per year, 1,500 dollars if married filing separately, with the remainder carried forward (source: IRS Topic 409).

Other countries structure this differently. Some apply a flat rate, some exempt gains after a holding period, and some tax crypto under a separate heading entirely, so the United States rules above do not travel.

Example

Illustrative. You buy 0.1 BTC for 6,000 dollars including fees in March, and sell it for 8,500 dollars in December of the same year. The gain is 2,500 dollars and, because the holding period is under one year, it is short-term and taxed at your ordinary income rate. Had you sold in April of the following year, the same 2,500 dollars would fall under the long-term rates of 0, 15, or 20 percent. In the same year you also realize a 900 dollar loss on another coin, which reduces the reportable net gain to 1,600 dollars.

Why it matters when you buy

The date you buy starts the clock that decides which rate applies later, which is the single tax consequence set at purchase time rather than at sale. The tax pages show the holding clock by jurisdiction, and the acquisition fees you pay, visible on the fee comparison, are added to your basis and therefore reduce the eventual gain.

Related terms

cost basis — what you subtract from proceeds; taxable event — which actions trigger the calculation; cost basis method — which units count as sold; tax loss harvesting — realizing losses against gains; form 8949 — where US disposals are reported.

Questions

Is swapping one coin for another taxable?

In the United States, yes. The IRS treats digital assets as property, so exchanging one for another is a disposal of the first at its fair market value, even though no fiat currency was involved.

Does moving crypto to a hardware wallet trigger a gain?

Transferring between wallets you control is not a disposal, because ownership has not changed. Keep records showing both sides of the transfer, since your exchange cannot tell a self-transfer from a sale.

How is the holding period counted?

The IRS counts a gain as long-term when the asset was held more than one year. The day after acquisition begins the count, so selling exactly one year later is short-term.