When Trading in Bitcoin, Keep the Tax Man in Mind
- 7 years ago
When Trading in Bitcoin, Keep the Tax Man in Mind
As on the stock market, losses can be used to offset capital gains, subject to certain rules, and losses
that are not used to offset gains can be deducted — up to $3,000 — from other kinds of income.
Come April, people who have bought and sold Bitcoin — or any of the other digital currencies
that have quickly sprouted across the web — will be expected to report any profits on their federal tax returns.
made it clear that it was searching for cryptocurrency tax evaders: The agency sent a broad request to Coinbase, the largest Bitcoin
exchange in the United States, requesting records for all customers who bought digital currency from the company from 2013 to 2015.
“If you made a single trade or more, report it.”
Here are some basics about the tax implications of virtual currency:
I sold some Bitcoin last year.
For the most part, that means Bitcoin and other digital currencies will be treated similarly to an investment like stocks — but not always.
So, for instance, if you bought Bitcoin as an investment in late 2013, when it was trading at around $1,000,
and used it to buy a car when the currency was trading at $18,000, you would have a long-term capital gain of $17,000, explained Ryan Losi, an accountant and executive vice president at Piascik, a tax firm.
Receiving wages from an employer in a virtual currency is like being paid in dollars: It is taxable to the employee, must be reported by the employer on a Form W-2
and is subject to federal income tax withholding, according to Wolters Kluwer.
As on the stock market, losses can be used to offset capital gains, subject to certain rules, and losses
that are not used to offset gains can be deducted — up to $3,000 — from other kinds of income.
Come April, people who have bought and sold Bitcoin — or any of the other digital currencies
that have quickly sprouted across the web — will be expected to report any profits on their federal tax returns.
made it clear that it was searching for cryptocurrency tax evaders: The agency sent a broad request to Coinbase, the largest Bitcoin
exchange in the United States, requesting records for all customers who bought digital currency from the company from 2013 to 2015.
“If you made a single trade or more, report it.”
Here are some basics about the tax implications of virtual currency:
I sold some Bitcoin last year.
For the most part, that means Bitcoin and other digital currencies will be treated similarly to an investment like stocks — but not always.
So, for instance, if you bought Bitcoin as an investment in late 2013, when it was trading at around $1,000,
and used it to buy a car when the currency was trading at $18,000, you would have a long-term capital gain of $17,000, explained Ryan Losi, an accountant and executive vice president at Piascik, a tax firm.
Receiving wages from an employer in a virtual currency is like being paid in dollars: It is taxable to the employee, must be reported by the employer on a Form W-2
and is subject to federal income tax withholding, according to Wolters Kluwer.