Capital Gains Tax
Capital Gains Tax is a levy imposed on the profit realized from the sale of a non-inventory asset, such as cryptocurrency, stocks, or derivatives. The tax applies only when the asset is sold or exchanged for a higher value than its original cost basis.
In many jurisdictions, these gains are categorized as either short-term or long-term, depending on how long the asset was held before the sale. Short-term gains are often taxed at ordinary income rates, while long-term gains may benefit from preferential tax treatment.
Because cryptocurrencies are treated as property in many countries, every trade from one crypto to another is considered a taxable event. Understanding the distinction between realized and unrealized gains is critical for effective tax planning in volatile markets.