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In the US, the amount you pay in federal taxes on your crypto gains depends on how long you have held the coins and your ordinary tax rate.

If you have held coins for one year or less, they are considered short term capital gains. In this scenario, the gains are simply added to your income for tax purposes and taxed at your ordinary income tax rate (2018 rates, 2019 rates). This is the higher tax treatment scenario.

If you have held the coins for more than one year, they are considered long term capital gains. In this scenario, the gains are taxed between 0 – 20% depending on your ordinary income tax rate (you can look them up here). This is the lower tax treatment scenario.

For example let’s say that your annual income is $50,000 and you are filing as single. You buy one bitcoin on January 1, 2016 for $400 and sell it on January 1, 2017 for $1,000. You have a short term capital gain of $600, which taxed at your ordinary income tax rate of 25% results in a tax of 0.25 * $600 = $150 in additional federal taxes.

Instead let’s say that your annual income is $30,000 (still filing as single). You buy one bitcoin on January 1, 2016 for $400 and sell if on January 2, 2017 for $1,000. You have a long term capital gain of $600. Your ordinary income tax rate is 15%, and your long term capital gains rate is 0%. Therefore you pay no federal tax on this bitcoin sale (state taxes may still apply).

You can read more about IRS’s guidance on short and long term capital gains here. There is also an additional 3.8% Net Investment Income Tax for high income individuals.

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