Short-term capital gains are profits on assets held for a short time; long-term gains are profits on assets held longer — and long-term gains are usually taxed at lower rates. In the United States and Australia, the dividing line is a 12-month holding period. Crossing it can dramatically cut your tax: in the US, long-term gains enjoy 0/15/20% rates instead of ordinary income rates up to 37%, and in Australia a 50% discount halves the taxable gain. The UK and Canada do not split gains this way. Estimate the impact for your country with the crypto capital-gains tax estimator. This is educational information, not tax advice.
The 12-month rule
In both the US and Australia, the test is simple: how long did you hold the asset before disposing of it?
- 12 months or less → short-term (US) or full gain (Australia).
- More than 12 months → long-term (US) or 50%-discounted (Australia).
The clock starts the day after you acquire the asset and runs to the day you dispose of it. Crucially, moving coins between your own wallets doesn’t reset it — only acquisition starts the clock and only disposal stops it.
United States: ordinary vs preferential rates
This is where the holding period matters most. Short-term gains are simply added to your income and taxed at your ordinary rate (10%–37% in 2026). Long-term gains get their own preferential brackets:
| 2026 long-term rate (single filer) | Taxable income |
|---|---|
| 0% | Up to ~$49,450 |
| 15% | ~$49,450 to ~$545,500 |
| 20% | Over ~$545,500 |
So a high earner who flips crypto inside a year could pay 37%, but the same gain held past 12 months might be taxed at 15% or even 20% — versus potentially 0% for a low-income holder. That’s a large, entirely legal saving for patience. High earners may additionally owe the 3.8% Net Investment Income Tax.
Australia: the 50% CGT discount
Australia doesn’t have separate rate tables; instead, a resident individual who holds a crypto asset for more than 12 months gets the 50% CGT discount — only half the gain is added to income and taxed at the marginal rate (0%–45% plus Medicare levy). Held 12 months or less, the whole gain is taxed. From 1 July 2027 this discount is scheduled to change, but for 2026 it stands.
The UK and Canada: no holding-period split
Neither the UK nor Canada distinguishes short-term from long-term:
- UK (HMRC): all gains above the £3,000 annual allowance are taxed at 18% or 24% regardless of how long you held.
- Canada (CRA): 50% of every capital gain is included in income at your marginal rate, whatever the holding period.
So “hold for a year to save tax” is US and Australia advice only — it does nothing in the UK or Canada. See how crypto capital gains tax works for the full picture.
A worked comparison (US)
Say you have a $10,000 gain and $90,000 of other income:
| Scenario | Rate applied | Approx. tax |
|---|---|---|
| Sold at 11 months (short-term) | 24% ordinary | ~$2,400 |
| Sold at 13 months (long-term) | 15% preferential | ~$1,500 |
Two extra months of holding saves around $900 on the same gain. Run your own numbers in the tax estimator, which applies the 12-month test automatically.
Why the preferential rate exists
Governments tax long-term gains more lightly to encourage patient, productive investment rather than speculative churn. The policy logic is that capital committed for a year or more is “real” investment, while rapid in-and-out trading looks more like ordinary income-earning activity — so it’s taxed like income. Whether or not you agree with the rationale, the practical upshot is a built-in incentive to hold. For crypto, where holding through volatility is psychologically hard, the tax code effectively pays you to be disciplined. That said, the incentive only exists in jurisdictions that draw the line — which is why a US or Australian holder thinks in “lots and dates” while a UK or Canadian holder thinks only in “total gain this year.”
How DCA interacts with the holding period
If you dollar-cost average, you accumulate many small lots, each with its own acquisition date. When you sell, the lots you’ve held longest are the ones most likely to qualify for long-term or discounted treatment. In the US, choosing which lots to sell — specific identification — lets you deliberately realise long-term lots first to lock in the lower rate, while keeping recent lots until they age past 12 months. Tracking each lot’s date is therefore not just bookkeeping; it’s a lever you can pull to lower your tax. Our average cost & cost-basis calculator helps you see the lots you hold, and how to calculate cost basis explains the methods.
Practical implications
- Track acquisition dates per lot. With dollar-cost averaging, each buy has its own clock; earlier lots cross the 12-month line first.
- Mind the wash-sale gap. Unlike stocks, crypto in the US is not currently subject to wash-sale rules, but rules can change — don’t build a strategy on a loophole.
- Don’t let the tax tail wag the dog. Holding an extra month for a lower rate only makes sense if you’d be comfortable holding anyway. Crypto can fall faster than the tax saving.
Understanding the short vs long-term distinction is one of the highest-value pieces of crypto tax knowledge in the US and Australia. Track your holding periods, use specific identification where allowed to sell your longest-held lots, and confirm specifics with a professional — these are estimates, not advice.