How to avoid capital gains tax on cryptocurrency: 7 legal ways

Here is how to avoid capital gains tax on cryptocurrency legally in 2026. Most of these seven moves must be made by December 31, 2026.

Vishant Mehta, CPA, Ex-Big 4

Published October 21, 2026

crypto tax
capital gains tax
tax-loss harvesting
H.R. 10357
year-end planning

The IRS taxes crypto as property, so selling, swapping or spending a coin can create a capital gain. You can legally shrink that tax, and sometimes erase it, with seven moves. Most of them must happen by December 31, 2026.

One move carries a risk this year. Selling at a loss and buying straight back works under current law. A House bill, H.R. 10357, would end that for crypto sold after September 14, 2026. It is not law.

Long-term rates in 2026	0%, 15% or 20%
0% rate in 2026	Taxable income up to $49,450 single, $98,900 joint
Losses against other income	$3,000 a year, $1,500 if married filing separately
Crypto wash sale rule	H.R. 10357 would apply it to sales after September 14, 2026
Status on October 21, 2026	Not law, with no House or Senate floor vote yet

How can you avoid capital gains tax on crypto legally?

All seven moves below are legal under current law.

Hold more than one year. Gains on coins held over a year are taxed at 0%, 15% or 20%. Gains on coins held a year or less are taxed as ordinary income, up to 37%.
Sell in a low-income year. Long-term gains are taxed at 0% while 2026 taxable income, gain included, stays within $49,450 single or $98,900 joint.
Harvest losses before December 31. Losses offset your gains, then up to $3,000 of other income. The rest becomes a capital loss carryover.
Sell your highest-cost coins first. Without an instruction, your earliest coins count as sold first. Specific identification lets you pick costlier coins in each wallet or account, if you choose by the time of sale.
Give coins to charity. For coins held over a year, you owe no tax on the gain and generally deduct their market value if you itemize. A deduction over $5,000 needs a qualified appraisal.
Give coins to family in a lower bracket. They take over your cost and holding period, so their sale in the 0% band can be tax-free. Gifts up to $19,000 per person in 2026 fall within the annual gift tax exclusion. The kiddie tax can tax a child's gain at the parent's rate.
Hold until death. Heirs take a cost equal to the coins' value on the date of death. The gain made in your lifetime then never faces capital gains tax. See step-up in basis.

How long do I need to hold crypto to avoid higher taxes?

You need to hold it more than one year. Start counting the day after you bought, and count the day you sell. A sale on the one-year anniversary is still short-term, so sell after it.

At $150,000 of taxable income, a single filer pays 24% on extra short-term gain but 15% on long-term gain.

Can you still harvest crypto losses this December?

Yes, under current law. The wash sale rule covers stock and securities, not crypto, so you can sell at a loss and rebuy at once.

That could change after the fact. H.R. 10357 would apply a crypto wash sale rule to sales after September 14, 2026, even if Congress passes it in 2027. A buyback within 30 days before or after the sale would then defer the loss to the new coin. To keep a December loss safe either way, wait 31 days to buy back, or buy a different coin.

The saving is partly a deferral, because rebuying lowers your cost. It pays most when the loss offsets short-term gain and the later gain is long-term.

Can you harvest gains as well as losses?

Yes, and in a low-income year it can cost nothing. Sell long-term coins at a gain, keeping taxable income within the 0% band, and buy them straight back. The gain is taxed at 0%, and your cost rises to today's price, which shrinks the tax on a later sale.

The wash sale rule only ever disallows losses, so it does not block this, even under H.R. 10357. Your new coins start a fresh holding period, and your state may still tax the gain.

How do crypto millionaires cash out?

The legal way to cash out a large crypto gain is to spread the sales over several tax years. Each year's long-term gain can then stay in the 15% band, below the 20% rate.

Coins given to charity or kept until death escape capital gains tax entirely. Above $200,000 of modified adjusted gross income single, or $250,000 joint, a 3.8% surtax on investment income also applies.

What does not cut your crypto tax?

Swapping coins. Trading one coin for another is a taxable sale of the first coin.
Moving coins to your own wallet. The transfer is not taxed, and a later sale still is.
Keeping gains small. The IRS requires every taxable crypto sale on your return, whatever the amount and whether or not you get a form.

Which dates matter before December 31?

Most of these moves must be finished within 2026.

Date	What happens
December 31, 2026	Last day for a sale, gift or donation to count in 2026
December 31, 2026	Relief to record exchange lot choices in your own books ends
January 15, 2027	Fourth 2026 estimated tax payment due
January 31, 2027	First buyback day outside the window for a December 31 sale
April 15, 2027	2026 returns due

What should you do now?

List each coin's purchase date and cost, by wallet and exchange account.
Hold coins close to one year until the anniversary has passed.
If you harvest a loss, wait 31 days to rebuy the same coin, in case H.R. 10357 passes.
Set a standing order with each exchange, such as highest cost first, before January 1, 2027.
Check this page before you file, since we update it at each step the bill takes.

For how crypto is taxed today, see our crypto tax guide and CPA service. For the full rate tables, see 2026 capital gains tax rates.