Capital Gains on Digital Assets

Capital gains on digital assets are the profits realized from the sale or exchange of cryptocurrency at a price higher than the original cost basis. When you sell, trade, or spend crypto, the difference between the acquisition cost and the disposal value is generally treated as a taxable event.

This includes crypto-to-crypto trades, which are often misunderstood as non-taxable, but are legally viewed as the sale of one asset to purchase another. The duration for which an asset is held determines whether it is subject to short-term or long-term capital gains tax rates.

Accurately calculating these gains requires maintaining a precise record of every transaction, including gas fees paid during the acquisition. Failure to account for these gains correctly is a common trigger for tax audits in the digital asset space.