In the U.S., you can cash out cryptocurrency tax-free if your total taxable income, including the capital gains, is low enough to qualify for a 0% long-term capital gains rate. For 2025, this applies to single filers with up to $48,350 in income or married couples filing jointly up to $96,700, provided the assets were held for over a year.
Tax-Free Thresholds and Allowances
The annual exempt amount (AEA) for capital gains tax in 2024-25 is £3,000. That means you can sell crypto assets up to this amount without paying CGT. Changes in tax-free allowances: 2022-23: £12,300.
There is no way to legally avoid taxes when cashing out cryptocurrency. However, strategies like tax-loss harvesting can help you reduce your tax bill legally. Converting crypto to fiat currency is subject to capital gains tax. However, simply moving cryptocurrency from one wallet to another is considered non-taxable.
Hold investments for at least one year and a day before selling. Long-term capital gains are taxed at lower rates than short-term capital gains. Consider crypto tax-loss harvesting. That means offsetting your crypto losses against crypto gains or other capital gains to help reduce your tax bill.
On a $100,000 capital gain, you'll likely pay 15% for long-term gains, resulting in about $15,000 in federal tax (plus potential state tax), but it could be 0% or 20% depending on your total taxable income and filing status, while short-term gains are taxed as ordinary income (potentially 22-24%).
1 - Buy and Hodl your crypto investments for the long term
If you buy and never sell (including no crypto to crypto trades or other disposal events), then there are no tax events. So one of the simplest strategies to avoid paying crypto taxes, is to simply buy and hold your crypto.
The "crypto 30-day rule" refers to the IRS wash-sale rule, which does not apply to cryptocurrencies, treating them as property, not securities, allowing investors to sell at a loss and immediately buy back the same crypto to realize the loss for tax purposes (tax-loss harvesting) without waiting 30 days, unlike stocks. However, some tax authorities (like the UK's HMRC and Lanop or local interpretations) may have their own "bed and breakfast" rules that match sales and purchases within 30 days, affecting capital gains, so it's crucial to check specific tax jurisdictions.
The IRS treats cryptocurrency as property, meaning that when you buy, sell or exchange it, this counts as a taxable event and typically results in either a capital gain or loss. When you earn income from cryptocurrency activities, this is taxed as ordinary income.
You might want to sell your crypto under some specific circumstances. If there is a lack of blockchain development progress or a string of negative news, you might want to sell your cryptocurrency. If you've reached your investing goals or want to reallocate your holding, you might want to sell your cryptocurrency.
Gifting cryptocurrency is not subject to tax in most circumstances. If you give less than $18,000 worth of cryptocurrency gifts to a single individual during the tax year, you don't need to report your gifts to the IRS.
If you earn money from exchanging (trading or selling) coins and tokens, you might owe Capital Gains Tax.
Choose to sell crypto from a MoonPay Account to unlock a smoother cash out via methods like Visa and Mastercard, bank transfer, PayPal, and Venmo (US only). Want to sell cryptocurrency with better rates and lower fees? Just sell to your MoonPay Balance!
Donating crypto to a qualified charity may be tax deductible. Using crypto as collateral for a loan is generally tax-free since no sale occurs. Some states and countries offer reduced or zero taxes on crypto income and capital gains. Accurate records help you avoid penalties and ensure correct tax reporting.
Common Triggers
Individuals investing in Crypto should be aware of the following common errors that may trigger IRS scrutiny: Failure to Report Crypto Assets on Form 1040: Taxpayers must answer the digital asset question each year. Leaving it blank or ignoring it, even if no transactions occurred, can raise red flags.
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Hold investments for at least one year and a day before selling. Long-term capital gains are taxed at lower rates than short-term capital gains. Consider crypto tax-loss harvesting. That means offsetting their crypto losses against crypto gains or other capital gains to help reduce their tax bill.
Despite the pseudo-anonymity of cryptocurrency transactions, they are traceable. Transactions on public blockchains, such as Bitcoin and Ethereum, are visible to anyone, including the IRS, which can potentially match 'anonymous' transactions to identifiable individuals.
Examples: Monero (XMR): Unlike 'public blockchains' like Bitcoin and Ethereum, Monero is a private blockchain designed to keep transactions private. Zcash (ZEC): Zcash uses zero-knowledge proofs to hide user information. Tornado Cash: A smart contract that 'mixes' funds with others to obscure the trail.
If you use your former home to produce income (for example, you rent it out or make it available for rent), you can choose to treat it as your main residence for up to 6 years after you stop living in it. This is sometimes called the '6-year rule'. You can choose when to stop the period covered by your choice.
Capital gains tax on $300,000 depends on your filing status and total income, but for most, it will be taxed at the 15% federal rate, meaning around $45,000 in tax, potentially rising to 20% if your total income is very high, and you'll also need to account for state taxes and potentially a 3.8% Medicare surtax. A $300,000 gain usually falls into the 15% bracket for single filers (above $48,350) and married filing jointly (above $96,700), while for married filing separately, it hits the 20% bracket (over $300,000).