Bitcoin tax implications

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Please include your IP address in your email. Everytime you use bitcoin to purchase stuff, such as at this place in Portland, Ore. This might sound like a minor distinction, but it’s not. It determines how bitcoins are taxed, what information you’ll needed to make sure your taxes are calculated correctly, and what tax planning techniques you can use to minimize your taxes on Bitcoin transactions. A gain represents income, and income is taxable even if you’re paid in virtual currency. Spending virtual currency is another matter.

You’d actually have two transactions in one: You’re effectively disposing of the virtual currency and spending the dollar-equivalent amount. What Is Virtual Currency from a Tax Perspective? Bitcoin is one example of a convertible virtual currency because it can be digitally traded between users and can be purchased for, or exchanged into, U. Transactions using virtual currency must be reported in U.

Taxpayers will be required to determine the fair market value of virtual currency in U. Let’s break it down into plain English. Every bitcoin transaction is taxable,” writes Tyson Cross, a tax attorney who specializes in virtual currencies. Bitcoin users will have to calculate their gain or loss every time they purchase goods or services with bitcoin.