Bitcoin is considered a real currency in the US, and proper taxes are applied to it. Here’s a simplified crypto and Bitcoin taxation guide.
With the evolution of technology, many people have now started investing in cryptocurrencies like Bitcoin. In addition, many online platforms and jobs pay their employees in Bitcoins. Some retailers and sellers also accept Bitcoin as payment. The vast acceptance of virtual currencies as traditional money has raised some questions about the regulations surrounding Bitcoin and other cryptocurrencies. Financial experts have also raised concerns about Bitcoin taxation.
Scroll down to read more about how Bitcoins are taxed.
IRS Considers Taxation on Convertible Virtual Currency
In simple words, Convertible Virtual Currency is the virtual currency that has an equivalent value in real-life currency. Bitcoin is a type of Convertible Virtual Currency. Therefore, the buying and selling of Bitcoin have tax implications. Moreover, if you use Bitcoins to pay for products and services, you’ll have to pay tax on it.
However, the tax depends on how you use Bitcoin. For example, employers receiving salaries in Bitcoin have the same withholding tax as dollar currencies. For this purpose, the amount of salary received in Bitcoin is converted into US dollars for determining withholding tax at the end of each year. Self-employed people also have to convert Bitcoin into US dollars and show the amount on their tax returns and records.
Bitcoin Held Is Considered a Property
You might be surprised to hear this, but when you store and hold Bitcoin, instead of selling or exchanging, it is considered as a capital asset and is taxed as property. The same tax principles that apply to properties are also applied to Bitcoin. Just like a real estate property, any profit or loss from selling Bitcoin is taxed like profit or loss on a capital asset.
Bitcoin Mining Must Be Reported as Income
According to the IRS, if you mine Bitcoin through computer resources and gain earnings from that, you’ll have to pay taxes on it. Bitcoin miners have to convert the value into dollars and include it in gross income reports. Moreover, you’ll have to convert the Bitcoin value to dollar currency based on the rate of the day you receive the Bitcoin.
Crypto Taxing Companies
However, crypto taxes are still one of the biggest issues that cryptocurrency users face, and things are different today from when cryptocurrency was introduced. But you can receive more guidance through certain crypto-taxing companies discussed below.
Based in Kansas, Cryptotrader.Tax helps people solve different taxing problems in cryptocurrency. Moreover, they also provide crypto tax reporting services, which many cryptocurrency investors use globally.
This crypto-taxing company develops crypto trading technologies and products used worldwide. Moreover, they also have automated crypto trading strategies, making it the right consulting and investing guide service for investors everywhere.
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Even though we have tried to cover as much information about taxes on Bitcoin as possible, you can read simplified crypto and Bitcoin guides at Urban Crypto to learn more. Our online platform and the highly-qualified team help you make money online with Bitcoin.