How to Calculate Crypto Gains and Losses

Every crypto sale triggers a gain or loss calculation. The formula is simple — sale price minus cost basis — but tracking it across hundreds of transactions, multiple wallets, and token swaps gets complicated fast.

Estimate your crypto tax bill with the Crypto Tax Calculator.

The Basic Formula

Capital Gain (or Loss) = Sale Price − Cost Basis − Fees

Term	Meaning
Sale price	What you received (in USD at time of sale)
Cost basis	What you originally paid (in USD at time of purchase) + fees
Fees	Trading fees, gas fees, network fees on both buy and sell

Example:

Bought 0.5 BTC for $25,000 (+ $50 exchange fee)
Cost basis: $25,050
Sold 0.5 BTC for $45,000 (− $50 exchange fee)
Net proceeds: $44,950
Capital gain: $44,950 − $25,050 = $19,900

Short-Term vs. Long-Term

The holding period determines your tax rate:

Holding Period	Classification	Tax Rate
1 year or less	Short-term	Ordinary income rate (10-37%)
More than 1 year	Long-term	Preferential rate (0%, 15%, or 20%)

The difference matters. On a $20,000 gain at the 24% bracket:

Short-term: $20,000 × 24% = $4,800 tax
Long-term: $20,000 × 15% = $3,000 tax
Saving: $1,800 by holding one extra day past 12 months

The holding period starts the day after acquisition. Buy on January 15, 2025 → long-term starts January 16, 2026.

Calculating Gains on Crypto-to-Crypto Trades

Swapping one crypto for another is treated as selling the first and buying the second.

Example — ETH to SOL swap:

Step	Amount
Bought 10 ETH at $2,000 each	Cost basis: $20,000
Traded 10 ETH for 400 SOL when ETH = $3,500	Sale price: $35,000
Gain on ETH	$15,000
Cost basis of 400 SOL	$35,000 (fair market value at swap time)

You owe tax on the $15,000 ETH gain even though you never received cash. The SOL starts with a $35,000 cost basis for future calculations.

Handling Multiple Purchases

Most people buy crypto at different times and prices. When you sell, which purchase's cost basis do you use?

Cost basis methods:

Method	How It Works	Best For
FIFO (First In, First Out)	Sells oldest coins first	Default method; simple
LIFO (Last In, First Out)	Sells newest coins first	Lower gains in rising markets
Specific ID	You choose which lot to sell	Maximum tax optimization
HIFO (Highest In, First Out)	Sells highest-cost coins first	Minimizes gains

FIFO example:

Purchase	Amount	Price Each	Cost Basis
Jan 2025	1 BTC	$40,000	$40,000
Jun 2025	1 BTC	$60,000	$60,000
Dec 2025	1 BTC	$80,000	$80,000

You sell 1 BTC for $90,000. Under FIFO, you sell the January lot first:

Gain: $90,000 − $40,000 = $50,000 (long-term)

Under Specific ID, you could sell the December lot:

Gain: $90,000 − $80,000 = $10,000 (short-term)

Which is better depends on your income bracket. See cost basis methods compared for detailed analysis.

Losses and Tax Benefits

Crypto losses are just as important as gains — they reduce your tax bill.

Capital loss rules:

Losses first offset same-type gains (short-term offsets short-term)
Remaining losses offset the other type
Up to $3,000 of net losses can offset ordinary income
Excess losses carry forward to future years (indefinitely)

Example:

Transaction	Gain/Loss
Sold BTC	+$20,000 gain
Sold ETH	−$8,000 loss
Sold DOGE	−$5,000 loss
Net gain	$7,000

Without the losses, you'd owe tax on $20,000. With netting, you only owe on $7,000.

If your net result is a loss (say, −$10,000):

Deduct $3,000 against ordinary income this year
Carry the remaining $7,000 loss forward to next year

Don't Forget These Taxable Events

Event	How to Calculate Gain
Spending crypto	FMV at spending − cost basis
Receiving as payment	Taxed as income at FMV; that becomes your cost basis
Mining rewards	Income at FMV when received; becomes cost basis
Staking rewards	Income at FMV when received; becomes cost basis
Airdrops	Income at FMV when received

Every taxable event needs tracking. Manual spreadsheets work for a few trades, but if you have dozens or hundreds, crypto tax software (Koinly, CoinTracker, TaxBit) automates the calculations.

See how gains fit into your overall taxes with the Federal Tax Calculator.