The IRS treats cryptocurrency as property, not currency. Every trade, sale, DeFi interaction, and prediction market resolution may be a taxable event. Understanding the rules prevents costly surprises and reveals legitimate strategies to minimise your tax bill.
This article is educational, not tax advice. Consult a qualified CPA or tax professional for your specific situation. Tax laws change — verify current rates for your jurisdiction.
Since 2014, the IRS has classified cryptocurrency as property. This means:
| Holding Period | Tax Rate (US, 2026) | Notes |
|---|---|---|
| Short-term (<1 year) | 10–37% (ordinary income rates) | Same rate as your salary |
| Long-term (≥1 year) | 0%, 15%, or 20% | Depends on total income |
| High earners (NIIT) | +3.8% | Net Investment Income Tax over $200K |
If you're sitting on unrealised losses in a bear market, selling those positions realises a loss that can offset capital gains dollar-for-dollar. Unlike stocks, crypto (currently) has no wash-sale rule — meaning you can immediately repurchase the same asset after selling for a loss. This strategy can save thousands in taxes. Our free crypto tax calculator helps you estimate the impact before you harvest.
Prediction market winnings are a grey area in US tax law. The most conservative treatment is to report each winning trade as a short-term capital gain (since prediction market contracts are treated as property). Losses on markets that resolve NO can be capital losses. Keep detailed records of every trade — Polymarket provides transaction history exports.