In the United States, crypto earnings can be classified as ordinary income or capital gains.
Mining, staking, lending, or payments for goods or services are considered ordinary income, and receive the tax rate that corresponds to an investor’s gross income.
Crypto trades, sales, or swaps are taxed as capital gains, with the exact rate depending on the length of time the asset was held and the owner’s overall income.
Read on for our complete breakdown of crypto tax rates for U.S. traders.
What is the crypto tax rate?
All earnings from crypto mining, staking, or payments are taxed at your ordinary income rate, which varies depending on which income bracket you fall into.
The tax rate for capital gains, however, varies based on the length of time a trader held the asset. The U.S. incentivizes long-term trades by taxing them at a lower rate.
Short-term capital gains: If you hold a digital asset for a year or less before you sell, swap, or trade it, your proceeds will be considered short-term capital gains and taxed at your ordinary income rate, which is determined by your overall income.
Long-term capital gains: If you hold cryptocurrency for more than a year before you sell, swap, or trade it, your proceeds will be taxed at the advantageous long-term gains rate. These rates also depend on your overall income, but are generally lower than the short-term gains rates.
Per the IRS’s cryptocurrency tax FAQs, the holding period begins on the day after you receive an asset. The asset’s cost basis will be its purchase price, plus any applicable fees.
U.S. short-term capital gains tax rates (2022)
Note that these are the same as your ordinary income tax rates.
Tax rateSingle filerMarried filing jointlyMarried filing separatelyHead of household10%$0 – $9,950$0 to $19,900$0 to $9,950$0 to $14,20012%$9,951 to $40,525$19,901 to $81,050$9,951 to $40,525$14,201 to $54,20022%$40,526 to $86,375$81,051 to $172,750$40,526 to $86,375$54,201 to $86,35024%$86,376 to $164,925$172,751 to $329,850$85,526 – $163,300$86,351 to $164,90032%$164,926 to $209,425$329,851 to $418,850$164,926 to $209,425$164,901 to $209,40035%$209,426 to $523,600$418,851 to $628,300$209,426 to $314,150$209,401 to $523,60037%$523,601 or more$628,301 or more$314,151 or more$523,601 or more
U.S. long-term capital gains tax rates (2022)
Tax rateSingle filerMarried filing jointlyMarried filing separatelyHead of household0%$0 – $40,400$0 – $80,800$0 – $40,400$0 – $54,10015%$40,401 – $445,850$80,801 – $501,600$40,401 – $250,800$54,101 – $473,75020%$445,851 or more$501,601 or more$250,801 or more$473,751 or more
How can I reduce my crypto capital gains taxes?
If you want to avoid higher taxes, you should prioritize making long-term crypto trades whenever possible.
Specific identification accounting, allowed by the IRS for virtual currency, can help you do this by letting you choose how you want to match up sales and acquisitions in order to adjust your holding periods. If you’re using crypto tax software, you can choose which method of specific ID accounting you want to use: FIFO, LIFO, HIFO, or Minimization. This is particularly useful because digital currencies are divisible into decimal amounts, unlike stocks.
This means you can prioritize making long-term trades whenever possible. This can often result in lower crypto capital gains on tax returns—although sometimes an individual’s federal and state tax rates may actually make short-term gains advantageous.
For more info on crypto tax basics, visit our Crypto Tax Guide.