Long-term capital gains in crypto apply to assets held for more than 12 months before selling, taxed at preferential federal rates of 0%, 15%, or 20% depending on your taxable income level. This tax treatment is significantly more favorable than short-term rates (10-37%) and represents one of the most powerful wealth-building strategies in cryptocurrency investing. Holding crypto for just over one year can save thousands to hundreds of thousands in taxes on large profits. State taxes may also apply depending on your residence.
Example:
You buy $10,000 worth of Bitcoin in January 2024 and sell it for $40,000 in February 2025 (13 months later), realizing a $30,000 gain. As a long-term capital gain, you pay only 15% federal tax if your income is $48,350-$533,400, owing $4,500. If you had sold after 11 months (short-term), you'd pay your ordinary income rate of 32%, owing $9,600... which is more than double. Waiting one extra month saved $5,100 in taxes simply by qualifying for long-term treatment.