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IRS: Bitcoin Is Property, Not Currency
An anonymous reader sends this news from Bloomberg:
"The U.S. government will treat Bitcoin as property for tax purposes, applying rules it uses to govern stocks and barter transactions, the Internal Revenue Service said in its first substantive ruling on the issue. Today's IRS guidance will provide certainty for investors, along with potential income-tax liability. Under the ruling, purchasing a $2 cup of coffee with Bitcoins bought for $1 would trigger $1 in capital gains for the coffee drinker and $2 of income for the coffee shop. ... Under the IRS ruling, Bitcoin investors would be treated like stock investors. Bitcoins held for more than a year and then sold would pay 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. For investors with losses, U.S. tax law allows taxpayers to subtract capital losses from any capital gains. They can also subtract up to $3,000 of capital losses a year from ordinary income.'"
...as you can offset a drop in the value of your bitcoins as a tax deduction.
As most of us who went through the dot-bust can tell you: only if you have gains to offset. If you have net losses, you can only take them at $3000/yr.*
TFA doesn't seem to have a link to the actual IRS ruling - WTF Bloomberg? New to the intarwebs? We do links here!
Not all capital gains are the same. If BTC is treated like stocks, that's great - most people will pay 15%* on long-term gains. Compare that to gold/silver, which are taxed as collectibles, with a 28% gains rate!*
*Don't take tax advice from random internet strangers like me - consult your tax professional.
Socialism: a lie told by totalitarians and believed by fools.
What makes you think no tax applies to a barter transaction?
The ruling is more about what forms you need to fill out when your report your taxes. There are separate formulas for currency than for property. Bitcoins don't have some of the complexity that foriegn currencies do.(exchange rates, trade agreements) So the property forms are less work for the IRS.
TFA doesn't seem to have a link to the actual IRS ruling - WTF Bloomberg? New to the intarwebs? We do links here!
http://www.irs.gov/pub/irs-dro...
Not so fast. The IRS does tax barter transactions.
http://www.irs.gov/taxtopics/t...
No, the ruling specifies "virtual currency" without naming any specific currency, Bitcoin is only used as an example.
Linkage:
IRS press release.
Full text (PDF) of IRS Notice 2014-21 (which includes a FAQ).
Yep, you don't have to pay capital gains on the appreciation of your property. Not the same thing as property tax. Property tax is dealing with the property's "current value". Since you are still holding the property, no capital gains (or losses) have occurred (yet).