Capital Gain
TAXDEFINITION
The taxable profit between your cost basis and what you received when you disposed of bitcoin — realized only when you sell, spend, or swap.
The IRS taxes bitcoin like property, not currency: nothing happens on paper gains. A capital gain only exists the moment you dispose of a specific lot — sell it, spend it, or trade it for something else — and the gain equals what you received minus your cost basis in that lot.
How long you held the lot decides the rate. Twelve months or less and the gain is short-term, taxed as ordinary income at your regular bracket (10–37%). Over twelve months and it's long-term, taxed at 0%, 15%, or 20% depending on income — often the single biggest lever in a bitcoin tax bill.
IN A SENTENCE
“She held for fourteen months so the capital gain qualified for the lower long-term rate.”
Key facts
Common questions
Is an unrealized gain taxed?
No. Bitcoin sitting untouched in a wallet, even up 10x, owes nothing. Tax triggers only on disposal.
What if I have a loss instead?
A capital loss offsets other capital gains dollar-for-dollar, plus up to $3,000 of ordinary income per year — the rest carries forward to future years.