Crypto tax glossary: key terms explained

The vocabulary of crypto tax, in plain English. These are the terms you'll meet in a report, a guide, or a conversation with your accountant, each defined without jargon. For how they fit together, see the [crypto tax guide](/en/crypto-tax-guide/) or estimate a disposal with the [free calculator](/en/crypto-tax-calculator/).

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Crypto tax glossary: key terms explained

Core concepts

Taxable event

Any action that can trigger a tax consequence. In crypto, the common taxable events are disposing of an asset (selling, swapping, spending) and receiving crypto as income (staking, mining, airdrops). Buying with fiat and holding is generally not a taxable event.

Disposal

The point at which you part with a crypto asset, selling it for fiat, swapping it for another token, spending it on goods, or (in some countries) gifting it. A disposal is what realises a capital gain or loss.

Capital gain

The profit on a disposal: your proceeds minus the asset's cost basis. If you sold a coin for more than it cost you, the difference is a capital gain that may be taxable, depending on your country and your total gains for the year.

Capital loss

The opposite of a gain, you disposed of an asset for less than its cost basis. Losses aren't taxed, and in most countries they can offset capital gains elsewhere, reducing your net taxable amount; unused losses can often be carried forward.

Cost basis

What an asset cost you to acquire, including fees. It's the number your gain or loss is measured against, so an accurate basis is the foundation of a correct report. See the [cost basis guide](/en/crypto-tax-guide/cost-basis/) for worked examples.

Proceeds

What you receive on a disposal, measured in your local currency at the time, the sale price, the market value of the token you swapped into, or the value of the goods you bought. Proceeds minus cost basis gives your gain or loss.

Fair market value (FMV)

The price an asset would fetch on the open market at a given moment. FMV is used to value crypto received as income and to value the assets on both sides of a crypto-to-crypto trade, converted to your local currency.

Realised vs unrealised gain

An unrealised gain is a rise in value you haven't locked in, you still hold the asset, and it isn't usually taxed. A gain becomes realised, and potentially taxable, only when you dispose of the asset.

Holding periods

Holding period

How long you held an asset between acquiring and disposing of it. Many countries use the holding period to decide the tax treatment, for example, a lower rate or an exemption once an asset has been held beyond a set number of days.

Short-term vs long-term

A distinction some jurisdictions draw based on the holding period. Short-term gains (assets held for less than the threshold) are often taxed less favourably than long-term gains. The threshold and the treatment vary by country.

Tax year

The 12-month period your tax return covers. It doesn't always match the calendar year, some countries run to April or another month, which affects which disposals fall into which return.

Cost basis methods

FIFO (First In, First Out)

A cost basis method that assumes the earliest coins you bought are the first ones you sell. FIFO is the most widely accepted default and often produces a larger gain in a rising market, since the oldest (cheapest) lots are used first.

LIFO (Last In, First Out)

Assumes the most recently acquired coins are sold first. LIFO can reduce a short-term gain in a rising market, but not every country permits it, check which methods your jurisdiction allows.

HIFO (Highest In, First Out)

Sells the highest-cost lots first, which minimises the reported gain for a given disposal. HIFO requires careful lot-level records and is only allowed in some jurisdictions.

Weighted average cost (WAVG / ACB)

Pools all units of an asset into a single average cost per unit, used as the basis for every disposal. Known as the Average Cost Basis (ACB) in some countries, it is the required method in several jurisdictions.

Lot (inventory layer)

A single acquisition of an asset, a specific quantity bought at a specific time and price. Cost basis methods work by choosing which lots a disposal consumes; tracking lots accurately is what makes FIFO, LIFO and HIFO possible.

Income events

Staking

Earning rewards for helping secure a proof-of-stake network. Staking rewards are usually taxed as income at their value when received, and that value becomes their cost basis for a later disposal.

Mining

Earning crypto by validating proof-of-work transactions. Like staking, mined coins are commonly treated as income at their value on receipt, which then sets their cost basis.

Airdrop

Tokens distributed to wallets, often for free or as a reward. Airdrops are frequently taxed as income at their value when received. Spam or scam airdrops shouldn't inflate your income, CryptaTax flags likely spam so it doesn't distort your report.

Fork

A split in a blockchain that can leave you holding a new asset. The tax treatment of coins received from a hard fork varies, some jurisdictions treat them as income on receipt, others assign a zero cost basis until disposal.

DeFi & assets

DeFi (decentralised finance)

On-chain financial services, lending, borrowing, swapping, yield, run by smart contracts rather than intermediaries. DeFi generates many small taxable events, which is why automated tracking across wallets matters for an accurate report.

Liquidity pool

A pool of tokens that powers a decentralised exchange, in return for a share of trading fees. Depositing into or withdrawing from a pool can be a disposal in some jurisdictions, and the rewards are usually income.

NFT (non-fungible token)

A unique on-chain token representing a specific item. Buying, selling and creating NFTs can each have tax consequences, a sale realises a gain or loss like any other disposal, and creator earnings may be income.

Gas fee

The cost of executing a transaction on a blockchain. Fees paid to acquire an asset can often be added to its cost basis, and fees on a disposal can reduce proceeds, so tracking them can lower your taxable gain.

Anti-avoidance & reporting

Wash sale

Selling an asset at a loss and quickly rebuying it to claim the loss while keeping the position. Some countries disallow the loss in these cases; where a wash-sale rule applies, the denied loss is deferred into the rebought asset's basis.

Bed and breakfasting

The UK term for a similar practice, selling and repurchasing within a short window. Matching rules require such repurchases to be paired with the sale, preventing an artificial loss.

De-minimis / annual allowance

A threshold below which gains (or proceeds) are exempt, or an annual amount of gains you can realise tax-free. Both exist in various forms across countries; the exact figures are jurisdiction-specific, see your [country page](/en/crypto-tax/).

CARF & 1099-DA

New reporting frameworks expanding how crypto activity reaches tax authorities, the OECD's Crypto-Asset Reporting Framework (CARF) internationally, and Form 1099-DA from US exchanges. Both mean more of your activity is reported automatically, making accurate self-reporting more important.

More terms you'll meet

Transfer

Moving crypto between wallets or accounts you own. A transfer is not a disposal, you keep the same asset, so it isn't taxable. Matching transfers across your own wallets is essential, or they can be mistaken for a sale on one side and a purchase on the other.

Stablecoin

A token designed to track a stable value, usually a fiat currency such as the US dollar. Stablecoins are taxed like any other crypto: swapping into or out of one is a disposal, though the near-flat price means gains and losses are typically small.

Ordinary income

Income taxed at your normal income tax rates, as opposed to capital gains rates. Crypto received as staking, mining, airdrops or payment is commonly treated as ordinary income at its value on receipt, separate from any later capital gain when you dispose of it.

Marginal rate

The tax rate that applies to your next unit of income or gain, often the top of a progressive scale. Because crypto gains can stack on top of your other income, they may be taxed at your marginal rate rather than a flat one, depending on your country.

Exchange (CEX / DEX)

A platform for trading crypto. A centralised exchange (CEX) is run by a company that holds your funds and often reports to tax authorities; a decentralised exchange (DEX) runs on smart contracts with no intermediary. Trades on both can be taxable disposals.

On-chain vs off-chain

On-chain activity is recorded on the public blockchain (wallet transfers, DeFi swaps); off-chain activity happens on a provider's internal ledger (many exchange trades). A complete report needs both, connecting exchanges and wallet addresses captures each source.

Wrapped token

A token that represents another asset on a different chain (for example wrapped BTC on Ethereum). Wrapping or unwrapping can be treated as a disposal in some jurisdictions and as a non-taxable representation in others, a point worth checking locally.

Margin & futures trading

Trading with borrowed funds (margin) or contracts that derive value from an asset (futures). Gains and losses from derivatives can be taxed differently from spot trades, sometimes as income, sometimes under special rules, and often generate frequent taxable events.

Vesting

The gradual release of tokens over time, common in team or investor allocations. The tax point, whether at grant, at vesting, or at sale, and whether it's income or capital varies by jurisdiction, so vesting schedules need careful record-keeping.

Specific identification (Spec ID)

Choosing exactly which lots of an asset you dispose of, rather than following an automatic order like FIFO. Where allowed, Spec ID gives the most control over your gain, but it demands precise, contemporaneous records identifying each unit sold.

Tax residence

The country whose tax rules apply to you, usually based on where you live or spend most of your time. Your residence, not where an exchange is based, generally determines how your crypto is taxed, and it can change if you move mid-year.

Realisation

The moment a paper gain or loss becomes an actual one for tax purposes, normally when you dispose of an asset. Until realisation, a rise or fall in value is unrealised and generally untaxed, no matter how large it grows on screen.

Loss carry-forward

Unused capital losses kept and applied against gains in future tax years. Most countries let losses that exceed your current-year gains roll forward, so a bad year can reduce tax in a later profitable one, provided you reported the losses when they happened.

Coin vs token

A coin is the native asset of its own blockchain (such as BTC or ETH); a token is issued on top of an existing chain (such as an ERC-20 on Ethereum). The distinction rarely changes the tax treatment, both are property, but it helps when reading transaction histories.

Wallet

Software or hardware that stores the keys controlling your crypto. For tax, what matters is that every wallet you own is part of one picture: gains are worked out across all of them together, and moves between your own wallets are non-taxable transfers.

Basis adjustment

A change to an asset's cost basis after acquisition, for example adding a purchase fee, or rolling a disallowed wash-sale loss into the rebought coins. Basis adjustments quietly change the size of a future gain, so accurate tracking of them matters.

Impermanent loss

The paper loss a liquidity provider can suffer when pooled token prices diverge. It only becomes a realised, potentially deductible loss when you withdraw from the pool, another reason DeFi positions need careful, event-by-event tracking.

Cost basis method

The rule that decides which lots a disposal consumes when you've bought the same asset at different prices, FIFO, LIFO, HIFO, average cost, or specific identification. The method your country allows can materially change the gain on a given sale, so it's one of the most consequential settings in any report.

Gain netting

Combining your gains and losses across disposals to arrive at a single net figure for the year. Losses reduce gains before tax is applied, so netting, done correctly across every wallet and exchange, is what turns a pile of individual disposals into the number you actually report.