TaxOnCryptoCrypto Capital Gains, Explained Simply
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A capital gain is the profit when you sell, swap or spend crypto for more than you paid, your cost basis. Buying and holding is not taxed. In the US the rate depends on whether you held the coin for more than a year; in Canada half of the gain is taxable; in the UK gains above £3,000 a year are taxed at 18% or 24%.
“Capital gains” sounds like jargon, but the idea is simple: it is the profit you make when you sell something for more than you paid. With crypto, understanding this one concept explains most of your tax bill.
The basic formula
Capital gain = what you sold it for minus what you paid for it (your cost basis). Buy Ethereum for $2,000, sell for $3,200, and you have a $1,200 capital gain. Sell it for $1,500 instead, and you have a $500 capital loss.
What counts as “selling”
This trips people up. A taxable disposal is not just cashing out to dollars. It includes:
- Selling crypto for fiat currency
- Trading one crypto for another (BTC → ETH is taxable)
- Spending crypto on goods or services
Simply buying and holding is not a taxable event. Neither is moving coins between your own wallets.
Short-term vs. long-term (US)
In the US, how long you held the crypto before selling changes the tax rate dramatically:
- Short-term (held one year or less): taxed at your ordinary income rate — up to 37%.
- Long-term (held more than one year): taxed at preferential rates of 0%, 15%, or 20% depending on income.
Canada is different
Canada has no short-term vs. long-term distinction. Instead, 50% of any capital gain is taxable regardless of how long you held it, added to your income at your marginal rate.
Cost basis: the number people lose
Your cost basis is what you originally paid, including fees. If you bought the same coin at different times and prices, you need a consistent method to track which units you sold. Poor cost-basis records are the number one reason crypto tax becomes a nightmare — start tracking from your first transaction.
Losses are useful
Capital losses offset capital gains. If you have $5,000 of gains and $2,000 of losses, you are taxed on $3,000 net. In the US, excess losses can even offset a limited amount of ordinary income and carry forward to future years.
Frequently asked questions
Is moving crypto between my own wallets taxable?
No. Transferring coins between wallets or exchange accounts you own is not a disposal. Keep a record of the transfer so you can prove your original cost later.
What is cost basis in crypto?
It is what you paid for a coin, including purchase fees, in your home currency. For coins you received as income it is the value you reported when you received them.
What is the difference between short-term and long-term gains?
It only matters in the US. Crypto held one year or less is short-term and taxed at ordinary income rates; held more than a year it is long-term and taxed at 0%, 15% or 20%.
How are crypto capital gains taxed in Canada and the UK?
In Canada, 50% of the gain is added to your income and taxed at your marginal rate. In the UK, gains above the £3,000 annual exempt amount are taxed at 18% for basic-rate taxpayers and 24% above that.
Bottom line
Capital gains tax is just tax on profit when you dispose of crypto. Track your cost basis from day one, mind the US one-year rule, and remember crypto-to-crypto trades count. The calculator applies these rules for the US, Canada and the UK automatically.
This guide is general information for the 2026 tax year, not tax, legal or financial advice. Tax rules change often, so confirm your situation with a qualified professional before you file. Spotted an error? Email taxoncrypto@gmail.com.