The amount you receive is the cash plus the fair market value of any property or services you get, minus selling fees. Your adjusted basis is usually what you paid for the asset. When the basis is the larger number, you have a realized loss instead.
Nothing is realized while you hold an asset, however far its price rises. That rise is an unrealized gain, and it is not taxed. Trading one coin for another realizes the gain on the coin you give up, though no dollars reach you.
A realized gain is usually also a recognized gain, which is the part counted in your income. Section 1001 of the tax code recognizes the whole gain on a sale or exchange, unless another rule says otherwise. Most recognized gains are taxed in the year of the sale.
How long you held a capital asset sets the rate. A gain on an asset held more than one year is long-term. Most long-term gains are taxed at 0%, 15% or 20% for 2026. A gain on an asset held one year or less is short-term, taxed at ordinary rates of 10% to 37%. A 3.8% net investment income tax can apply on top at higher incomes.
Sources
- 26 U.S.C. § 1001, Determination of amount of and recognition of gain or loss
- 26 U.S.C. § 1222, Other terms relating to capital gains and losses
- IRS, Frequently asked questions on virtual currency transactions
- IRS, Rev. Proc. 2025-32 (2026 inflation adjustments)
- 26 C.F.R. § 1.1001-7, Computation of gain or loss for digital assets
- 26 U.S.C. § 1411, Net investment income tax
Reviewed and updated September 2026. General information, not advice for your situation.