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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.'"

9 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. Re:At last by ColdWetDog · · Score: 4, Funny

    Selling human beings, especially heroines is illegal and generally Frowned Upon. Sort of like selling heroin except worse.

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  3. Re:If BITC are property.. by bws111 · · Score: 5, Informative

    What makes you think no tax applies to a barter transaction?

  4. Re:This didn't require any ruling. by ZombieBraintrust · · Score: 4, Informative

    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.

  5. 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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    1. Re:What about other crypto-coins? by DerekLyons · · Score: 4, Informative

      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).

  6. Re:If BITC are property.. by Tony+Isaac · · Score: 4, Informative

    Not so fast. The IRS does tax barter transactions.

    http://www.irs.gov/taxtopics/t...

  7. Don't have to pay the tax by Imagix · · Score: 4, Informative

    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).