‍1. A Surprise After 9 Years

On September 18, 2025, Coinbase officially announced that NBA star Kevin Durant recovered his Coinbase account and password. Shortly after, Durant sold over 3,000 bitcoins, cashing out about $350 million. According to Durant, he first got into bitcoin in 2014 or 2015. Back then, he bought a small amount on Coinbase just to watch YouTube videos. Later, after joining the Golden State Warriors, he got really interested in bitcoin again during a party and bought a bunch more. But then, Durant forgot his Coinbase account password and only managed to recover it recently.

Over the nine years Durant forgot about them, bitcoin's price skyrocketed. Data shows bitcoin was priced between $400 and $1,000 in 2016. By the time Durant sold, it had stabilized above $110,000, surging about 275 times from its lowest point that year.

2. Beyond the Surprise: How to Tax These Bitcoins?

With Durant's thousands of bitcoins recovered, this "windfall from the sky" brings not just joy but also questions: In the U.S., known for its strict tax rules, does this income need to be taxed? If so, how much? Actually, as early as 2014, when the entire cryptocurrency market was worth just tens of billions, the IRS had already defined bitcoin as property rather than currency, issuing Notice 2014-21 and a series of rules to tax bitcoin and other crypto assets. As for the specific tax Durant owes, we'll mainly look at federal and state levels here.

2.1 Federal Capital Gains Tax and Net Investment Income Tax

The U.S. levies federal capital gains tax on capital gains, divided into long-term and short-term based on whether held for over a year. Durant held his bitcoin for more than a year, so it's long-term capital gains, with U.S. rates at 0%, 15%, or 20%. Based on the IRS's latest rules, since Durant is still unmarried, we can apply the 2025 long-term capital gains tax brackets for single filers to this income:

(1) Taxable income from $0 to $48,350 at 0%;

(2) Taxable income from $48,351 to $533,400 at 15%;

(3) Taxable income over $533,400 at 20%.

Taxable income is calculated as adjusted gross income minus the standard deduction or itemized deductions (whichever is larger). For single filers in 2025, the standard deduction rises to $15,000.

Media reports say the cost basis for Durant's 2016 BTC purchases was about $650. Using that cost and IRS rules, we can roughly estimate his federal long-term capital gains tax:

Total investment cost = 650 * 3,000 = $1,950,000

Taxable income = 350,000,000 - 1,950,000 - 15,000 = $348,035,000

l First bracket tax = 48,350 * 0% = $0

l Second bracket tax = (533,400 - 48,350) * 15% = $72,757.5

l Third bracket tax = (348,035,000 - 533,400) * 20% = $69,500,320

Total tax = 0 + 72,757.5 + 69,500,320 = $69,573,077.5

So, Durant will need to pay about $70 million in federal long-term capital gains tax in 2025.

Plus, the U.S. imposes a Net Investment Income Tax (NIIT) on high earners. Section 1411 of the Internal Revenue Code says for individuals, estates, and trusts with income over certain thresholds, NIIT applies at 3.8% on certain net investment income. For single individuals with net investment income and modified adjusted gross income (MAGI) over $200,000, they pay NIIT on the net investment income. Based on the rules, we can roughly estimate Durant's NIIT:

(350,000,000 - 1,950,000) * 3.8% = $13,225,900

So, Durant also needs to pay the federal government about $13,225,900 in net investment income tax.

2.2 State Tax

For this capital gain, Durant has to pay federal taxes and possibly state taxes where he lives. Durant resides in California, but on July 6, 2025, he was traded to the Houston Rockets in Texas. So, does he pay long-term capital gains tax to California or Texas?

California uses a Facts and Circumstances Test to determine if someone is a tax resident. In practice, the California Franchise Tax Board often looks at time spent in California versus other states, family, spouse, kids' locations, and more. Texas doesn't levy state personal income tax, so no state tax residency issue there for income tax. Durant has lived long-term in California, only heading to Texas in September 2025 for the Rockets, and his family still lives in California, so California will likely see him as still closely tied and make him pay state tax on this bitcoin gain.

California is a high-tax state that treats capital gains as income and taxes them without distinguishing short- or long-term. That means capital gains tax in California is rolled into state income tax and calculated at state income tax rates. California has nine tax brackets for personal income tax; per 2024 rules, income over $721,314 is taxed at 12.3%. As an NBA star, Durant's annual income is way over $721,314. California uses a progressive marginal tax system, and with the latest state deduction of $5,540, Durant would roughly pay:

70,116.38 + (350,000,000 - 1,950,000 - 5,540 - 721,314) * 12.3% = $42,790,863.338

So, California might collect nearly $42.8 million in state tax from Durant.

In contrast, Texas doesn't tax capital gains.

To sum up, if Durant pays to California, his total tax on the bitcoin sale would be about 69,573,077.5 + 13,225,900 + 42,790,863.338 = $125,589,840.838, or nearly $126 million, with an effective rate of 20% + 3.8% + 12.3% = 36.1%. If to Texas, just federal long-term capital gains tax of 69,573,077.5 + 13,225,900 = $82,798,977.5, or about $83 million, with an effective rate of 20% + 3.8% = 23.8%.

3. Wrapping Up

From NBA superstar to bitcoin "diamond hands," Durant's luck and success are enviable. The crypto market is always full of surprises and opportunities—whether by luck hitting a trend, patiently waiting out market cycles, or smartly eyeing new paths, people have reaped way more wealth than expected in crypto. At the same time, with crypto market’s rapid growth and maturing regulations worldwide, taxes on crypto assets are getting more discussion and attention. Crypto assets isn't a "gray tool" to dodge taxes—from "Bitcoin Jesus" Roger Ver to MicroStrategy founder Saylor, crypto-related tax evasion cases pop up often. From a long-term interest and compliance risk perspective, whether for NBA superstars, Crypto Founders, or meme players, crypto asset taxes deserve more focus to avoid risks while maximizing personal wealth.

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