How crypto is taxed
Every major tax authority — the IRS, HMRC, CRA, and ATO — treats cryptocurrency as property, not currency. This means every time you sell, trade, or spend crypto, you potentially trigger a capital gains tax event. Even swapping Bitcoin for Ethereum counts as a disposal for tax purposes. Simply buying and holding crypto is never taxable — tax only arises when you dispose of it.
The key variables that determine how much tax you owe are: how long you held the crypto before selling, your total income for the year, and which country you live in. These factors can make the difference between paying 0% and paying 45% on the same gain.
United States crypto tax (2025)
The IRS treats crypto as property under Notice 2014-21. Every sale, trade, or spend is a taxable event reportable on Form 8949 and Schedule D. The holding period determines your rate:
Short-term gains (held 1 year or less) are taxed as ordinary income — the same brackets as your salary, from 10% to 37%. If you earn $80,000 and make a $10,000 short-term crypto gain, that $10,000 gets stacked on top of your income and taxed at your marginal rate.
Long-term gains (held more than 1 year) are taxed at 0%, 15%, or 20% depending on your income. For 2025, single filers with taxable income under $48,350 pay 0% on long-term gains. This makes the hold-over-one-year strategy one of the most powerful legal tax reduction tools available to US crypto investors.
High earners also pay the Net Investment Income Tax (NIIT) of 3.8% on investment income above $200,000 (single) or $250,000 (married jointly). Mining and staking rewards are taxed as ordinary income at the fair market value when received — that value also becomes your cost basis for future sales.
Example: You bought 1 BTC at $30,000 in January 2023 and sold it for $65,000 in February 2025 — a $35,000 long-term gain. As a single filer earning $75,000, your taxable income puts you in the 15% long-term CGT bracket. Tax owed: $5,250. If you had sold after only 8 months instead, it would be taxed at 22% (ordinary income rate) — $7,700. Holding one extra year saved you $2,450.
United Kingdom crypto tax (2024/25)
HMRC treats cryptoassets as a capital asset. Disposals trigger Capital Gains Tax (CGT). Every UK taxpayer gets a £3,000 annual exempt amount — gains below this are completely tax-free. Only gains above £3,000 are taxable.
Unlike the US, the UK makes no distinction between short-term and long-term gains — the rate depends on your income band. Following the Autumn Budget 2024 (effective 30 October 2024): basic rate taxpayers pay 18% and higher and additional rate taxpayers pay 24%. Your gains stack on top of your taxable income to determine which rate applies.
HMRC mandates the Section 104 pooling method — you cannot choose FIFO or specific identification. All purchases of the same crypto are averaged into one pool. The same-day rule and 30-day bed-and-breakfasting rule take priority over the pool for anti-avoidance purposes.
Mining and staking rewards are generally treated as income tax, not CGT. The fair market value in GBP at receipt is taxable immediately, and that value becomes your cost basis for any future disposal.
Example: You bought 0.5 ETH for £1,000 and sold for £4,500 — a £3,500 gain. After subtracting the £3,000 exemption, your taxable gain is £500. As a basic rate taxpayer: £500 × 18% = £90 in CGT. If your gains had been £3,000 or less, your tax bill would be zero.
Canada crypto tax (2024)
The CRA treats crypto as a commodity. Most investors are subject to capital gains tax — only 50% of your gain is included in taxable income, then taxed at your marginal rate. The 50% inclusion rate was confirmed to remain in place for 2025 after the proposed increase was cancelled in March 2025.
The CRA mandates the Adjusted Cost Base (ACB) method — FIFO, LIFO, and HIFO are not permitted. The ACB is the average cost per unit of all identical crypto you hold, recalculated every time you make a new purchase. This applies separately for each type of crypto.
Frequent, high-volume traders may be reclassified as carrying on a business, in which case 100% of profits are taxable as business income — a significantly worse outcome. The CRA determines this case-by-case based on frequency, holding period, and intent.
Example: You bought 2 ETH at CA$2,000 each (ACB: CA$4,000) and sold for CA$6,000 — a CA$2,000 gain. Only CA$1,000 (50%) is included in taxable income. At a combined federal/Ontario marginal rate of 33%, tax owed: CA$330. Net profit after tax: CA$1,670.
Australia crypto tax (2024/25)
The ATO treats crypto as a CGT asset. Disposals trigger capital gains or losses that form part of your assessable income. Australia's biggest advantage for crypto investors is the 50% CGT discount — if you hold crypto for more than 12 months before selling, only half the gain is included in your assessable income.
Gains are stacked on top of your other income and taxed at your marginal rate (up to 45% plus 2% Medicare levy). There are no separate CGT rates — the 50% discount reduces the assessable amount, but your marginal income tax rate still applies to that reduced amount.
Staking and mining rewards are treated as ordinary income at the AUD fair market value when received. That value becomes your cost basis for any future disposal. A personal use asset exemption may apply for crypto purchased and used within a short period for personal use under A$10,000 — but this rarely applies in practice.
Example: You bought 0.1 BTC for A$5,000 in June 2023 and sold for A$9,000 in August 2024 — a A$4,000 gain held over 12 months. With the 50% discount, assessable gain is A$2,000. If your marginal rate is 32.5%, tax owed: A$650. Without the discount, it would be A$1,300.
Cost basis methods explained
Your cost basis is what you originally paid for the crypto, including purchase fees. It directly determines your taxable gain — a higher cost basis means a smaller gain and less tax. Different countries mandate different methods for calculating this.
| Method | How it works | Countries | Best for |
|---|---|---|---|
| FIFO | First purchased = first sold. Oldest coins sold first. | US (default), Australia | Long-term holders in rising markets |
| HIFO | Highest cost coins sold first. Minimizes taxable gain. | US only | Reducing tax in the current year |
| ACB (Average Cost) | All purchases averaged. Must track running average. | Canada (mandatory) | N/A — required by CRA |
| Section 104 Pool | UK version of average cost with same-day and 30-day priority rules. | UK (mandatory) | N/A — required by HMRC |
Tax-loss harvesting — legally reduce your crypto tax
Tax-loss harvesting means selling crypto at a loss to offset gains and reduce your tax bill. If you made $20,000 in gains but also have $8,000 in unrealized losses, selling the losing positions reduces your net taxable gain to $12,000. In the US, you can even use up to $3,000 of net capital losses to offset ordinary income per year, with excess carrying forward indefinitely. There is no wash sale rule for US crypto (unlike stocks), so you can sell at a loss and immediately repurchase the same crypto — though this may change in future legislation.
In Canada, the superficial loss rule denies losses if you repurchase the same crypto within 30 days before or after the sale — similar to the US wash sale rule. In the UK, capital losses carry forward indefinitely and offset future gains. In Australia, losses carry forward and offset future gains with no time limit.
Frequently asked questions
Is trading one crypto for another a taxable event?
Yes in all four countries. When you swap Bitcoin for Ethereum, the IRS (and HMRC, CRA, ATO) treats this as selling BTC at its current market value, then buying ETH. You owe tax on any gain from the BTC disposal, even though you never touched fiat currency. This catches many investors off guard.
Do I pay tax if I just hold crypto?
No. Simply buying and holding crypto is never a taxable event in any of these countries. Tax only arises when you dispose of crypto — by selling, trading, spending, or gifting it. Unrealized gains (paper profits) are not taxed.
Are staking and mining rewards taxable?
Yes, in all four countries staking and mining rewards are generally treated as ordinary income at the fair market value when received. That value also becomes your cost basis — so if you later sell those coins for more, only the additional gain is taxable.
What if I lose money on crypto — can I claim a loss?
Yes. Capital losses offset capital gains in all four countries. In the US, up to $3,000 of net losses can reduce ordinary income per year, with the rest carrying forward. In Canada, losses carry back 3 years or forward indefinitely. In the UK and Australia, losses carry forward indefinitely against future gains.
Does moving crypto between my own wallets trigger tax?
No. Transferring crypto between wallets you own is not a taxable event in any of the four countries, as there is no change in ownership. However, you should keep records of these transfers for accurate cost basis tracking.
How does the UK annual exempt amount work?
Every UK taxpayer gets a £3,000 annual CGT allowance. Gains below this amount are completely tax-free. The allowance resets every tax year (6 April to 5 April). Using this allowance strategically — for example by realizing gains just below £3,000 each year — can significantly reduce lifetime crypto tax.
What is the Australian 50% CGT discount?
If you hold a CGT asset (including crypto) for more than 12 months before disposing of it, only 50% of the gain is included in your assessable income. This effectively halves your tax rate on long-term crypto gains. Non-residents and companies cannot access this discount.
What records do I need to keep for crypto taxes?
All four countries require detailed records: date of each transaction, amount of crypto bought/sold, value in local currency at the time, fees paid, and the purpose of the transaction. Exchange CSV exports and blockchain records are the typical sources. Most tax authorities require records to be kept for at least 5-7 years.