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IRS rules bitcoin is property not currency, subject to capital gains tax

Bitcoin

This is not what the bitcoin world wanted to hear. Appreciation in bitcoin values are subject to capital gains tax, says the IRS. Thus, the IRS expects such capital gains will be reported with possible tax problems for those who don’t. If you buy a product with a bitcoin worth $600 that you paid $250 for, your capital gains is $350 and is taxable.

The IRS ruling means Bitcoin investors will be treated like stock investors. Bitcoins held for more than a year and then sold would face the lower tax rates applicable to capital gains — a maximum of 23.8 percent compared with the 43.4 percent top rate on property sold within a year of purchase.

Once you put the money into bitcoin or more especially, take it out, then tax auditors will start asking questions, should you be trying to hide something.

“Any opinion that says bitcoin’s not taxable — any attorney will say that’s hogwash. The better question is when and how it will be taxed,” said attorney Tyler Robbins by phone.

“They’re going to find out on a person by person basis. They’ll look at bank records and see $50,000 coming in,” said Robbins, pointing to increased duties on foreign banks to reports overseas accounts belonging to Americans.

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