No Tax on Bitcoin Gains if Not Sold, Even with 30% Increase: How Will the U.S. Tax It?

[Block Media Reporter Myung Jeong-seon] If the price of digital assets like Bitcoin skyrockets, do you have to pay taxes if you haven't actually sold them? In the United States, generally, you do not have to pay taxes. This is because the tax on capital gains is not imposed until the investor realizes a profit through a sale or similar transaction, regardless of how high the value of the digital assets held by the investor may rise. However, if you exchange them for other digital assets or use them to purchase goods, it may be subject to taxation even if you haven't converted them to cash.

According to data from the IRS (Internal Revenue Service) on the 22nd (local time), the U.S. treats digital assets, including Bitcoin, as property under tax law. The same tax principles that apply to transactions involving typical properties like stocks or real estate are also applied to digital assets.

For example, if an investor bought one Bitcoin for $64,083 on July 24 and the price rose to $84,185 by October 22, there would be no capital gains tax on the unrealized gains as long as they still hold it. Although the asset's value increased by over 31% during the approximately 90 days, it is considered unrealized gains since it has not been disposed of.

IRS Considers Digital Assets as 'Property'

According to Publication 550, which provides guidance on investment income from the IRS, the tax principles for general property transactions apply to digital asset transactions as well.

As a result, if an investor buys Bitcoin with dollars and simply holds it or transfers it between their own wallets, this is generally not subject to taxation. The IRS advises that if only these actions are taken, the investor can answer 'no' to the question about digital asset transactions on the federal income tax return form 1040. However, if a transaction fee is paid in digital assets, it may be treated as a separate transaction.

On the other hand, selling Bitcoin or exchanging it for other digital assets changes the situation. Converting Bitcoin to Ethereum (ETH) is also considered a disposition of the original Bitcoin, requiring a calculation of gains and losses.

The same applies when purchasing goods with digital assets. If you buy a laptop with Bitcoin, it is considered a disposition of that Bitcoin in exchange for the goods, and the taxable gain is calculated by comparing the acquisition price with the value at the time of use.

Receiving new digital assets through mining or staking may also raise separate income tax issues. In particular, staking rewards are generally included in income based on the market value at the time the investor gains actual control and ability to dispose of the asset.

No Tax for Holding, but Exchanges and Payments are Taxable

The tax obligations for digital assets depend on how the coins are utilized. Simply fluctuating in price does not trigger a taxable event. The guidance for form 1040 specifies that selling digital assets, exchanging them for other digital assets, disposing of them in exchange for goods or services, or obtaining new digital assets through mining, staking, or similar activities are all identified as taxable events.

For instance, suppose an investor buys one Bitcoin for about $64,083 in July 2026 and realizes an unrealized gain of about $20,100 by the end of October. If this Bitcoin is exchanged for Ethereum (ETH), the IRS would consider this exchange as a sale, imposing taxes even if no cash enters the account.

Purchasing goods with digital assets is also regarded as a sale. Buying a laptop with Bitcoin is equivalent to disposing of that Bitcoin in exchange for property. Staking rewards are treated as income and must be reported as digital asset income on line 8v of Schedule 1.

Holding for Over a Year Lowers Tax Rate: Importance of Record Keeping

The duration for which digital assets are held also affects taxation. In the U.S., short-term capital gains tax rates apply to profits realized from the disposition of digital assets held for one year or less for investment purposes. This is linked to the general income tax rate.

Conversely, if the assets are held for more than one year before disposition, they are classified as long-term capital gains, which generally apply a lower federal tax rate. This creates a tax structure that encourages long-term holding.

The tax authorities are also strengthening information collection on digital asset transactions. Starting from 2025, certain intermediaries that meet specific criteria will be required to report customers' digital asset disposition histories on form 1099-DA.

From transactions in 2026, there will also be a requirement to report acquisition costs for certain digital assets. However, assets acquired outside of exchanges or transferred from other wallets may lack cost information, necessitating that investors manage their own transaction records.

Ultimately, the U.S. digital asset taxation system focuses more on actual transactions and income generation rather than mere price increases. Even if the price of Bitcoin surges, generally, no tax on capital gains arises as long as it is held. However, both sales and exchanges between coins, as well as payments for goods, can be taxable transactions, requiring investor vigilance.

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