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IRS: Bitcoin Is Property, Not Currency

Posted by Soulskill on from the cryptoproperty-doesn't-have-the-same-ring-to-it dept.

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.'"

4 of 273 comments (clear)

  1. This seems like good news by JustNiz · · Score: 4, Interesting

    ...as you can offset a drop in the value of your bitcoins as a tax deduction.

    1. Re:This seems like good news by Gothmolly · · Score: 5, Interesting

      Only if you sell them at a loss. So if you want to take a loss in order to deduct part of that loss, knock yourself out. That'll show them.

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  2. Probably really bad news for bitcoin, actually by Primate+Pete · · Score: 3, Interesting

    I would think this is really bad news in disguise for bitcoin, because it discourages the use of bitcoin for commerce both because of the tax issue and because of the reporting requirements. (Who wants to deal with computing a wash sale just to buy a cup of coffee?) If people are inspired to sit on bitcoin until they cross the 1-year capital gains threshold, that behavior change could move bitcoin one step away from use as a currency, and put it in the same illiquid category as gold or bearer bonds.

  3. What about other crypto-coins? by ArcadeMan · · Score: 4, Interesting

    Did they just write "Bitcoin" in the new law or something more general that can include anything? Otherwise, Bitcoin is now regulated but LiteCoin, DogeCoin and all the other coins are not.

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