By Mike Ring, CEO — Blockchain Crypto Tax Prep
Short answer: crypto you held for more than one year gets long-term rates when you sell; crypto held one year or less is short-term and taxed like ordinary income. The one-year line can make a real difference in what you owe, so the date you bought each coin matters as much as the price.
| | Short-term | Long-term |
|—|—|—|
| Holding period | One year or less | More than one year |
| How it’s taxed | Like ordinary income | Long-term capital gains rates |
| What decides it | Purchase date and sale date of the specific coins sold | Same |
| Common trap | Frequent trading, DEX swaps | Losing track of when old coins were bought |
Where the one-year line comes from
When you sell, swap or spend crypto, you have a gain or loss: what you got minus what you paid, including fees. Whether that gain is short-term or long-term depends on how long you held those particular coins. [MIKE: confirm how we want to phrase the exact holding-period count (e.g. “more than one year” measured from the day after purchase).]
Long-term rates are generally lower than ordinary income rates. [MIKE: confirm whether to mention the long-term rate brackets (0/15/20%) or keep it general.]
Why it gets complicated with crypto
Swaps reset the clock. Swapping one coin for another is a sale of the first one. So if you held ETH for two years and swapped it into another token last month, you sold long-term ETH, and the new token starts its own holding period.
Transfers don’t. Moving coins between your own wallets is not a sale, so it shouldn’t reset anything. But if your software treats a transfer as a sale and a rebuy, it can turn a long-term holding into a short-term one on paper.
Which coins you sold matters. If you bought BTC at different times and sell part of it, the holding period depends on which units you’re treated as selling. Since January 1, 2025, that’s tracked wallet by wallet, not as one pool across everything you own. Our post on FIFO vs HIFO vs Spec-ID covers how the method changes which coins count as sold.
Losses count too
Losses follow the same short-term and long-term split. Capital losses offset capital gains, and up to $3,000 of net loss a year can offset other income, with the rest carrying forward to future years.
Right now the wash sale rule applies to stocks and securities, not to crypto you hold directly. Crypto ETFs and crypto stocks are covered by it, though, and Congress has bills to change the crypto side, so check the current rules before relying on this.
A worked example (illustrative)
Say you bought 1 ETH in March 2024 and another 1 ETH in June 2025, both on the same exchange. In September 2025 you swap 1 ETH for USDC.
- If the ETH treated as sold is the March 2024 coin, it was held more than one year, so the gain or loss is long-term.
- If it’s the June 2025 coin, it was held less than a year, so it’s short-term.
- Either way, the USDC you received starts a brand-new holding period on the day of the swap.
Which coin counts as sold depends on the cost basis method and on which wallet the coins sit in, since basis is tracked wallet by wallet. That’s why two people with the same trades can end up with different short-term and long-term totals.
Signs your holding periods are off
- Everything shows as short-term, even coins you’ve held for years. Usually that means transfers were recorded as sales and rebuys, resetting the clock.
- Purchase dates are all the same day. That often means the software used the date coins arrived in a wallet, not the date you originally bought them.
- Long-term gains on coins you bought this year. The opposite mistake, usually from mismatched lots.
If any of these show up, the fix is in the records, not the tax form: match each transfer to the original purchase and the holding periods correct themselves.
What to keep
For every coin, keep the purchase date, purchase price, fees, and which wallet it sits in. If you’ve traded across several exchanges and wallets, rebuilding those dates is often the hardest part of an accurate return. Our guide to 1099-DA vs your own records explains why the broker form alone usually isn’t enough.
FAQ
Is crypto held exactly one year long-term?
Long-term means held more than one year. One year or less is short-term. [MIKE: confirm wording on the exact-one-year edge case.]
Does swapping into a stablecoin start a new holding period?
Yes. The swap is a sale of the coin you gave up, and the stablecoin’s holding period starts when you receive it.
Do transfers between my wallets affect my holding period?
They shouldn’t, because a transfer between your own wallets isn’t a sale. Check that your software isn’t treating it as one.
Can short-term losses offset long-term gains?
Capital losses offset capital gains, and up to $3,000 of net loss a year can offset other income. [MIKE: confirm whether to explain the short-vs-long netting order or leave it at this.]
Not sure which of your sales were short-term? Book a free 30-minute consult or call 410-216-4632.
This isn’t tax advice. Your situation may differ, so talk to a professional about your own facts.
Need help with your crypto taxes? Mike Ring and the BCTP team handle the messy stuff — multi-chain DeFi, 1099-DAs that don’t add up, prior-year amendments. Free consult at cryptotaxprep.io or call 410-216-4632.
This isn’t tax advice. Talk to a professional about your specific situation.
