ARE BITCOIN PROFITS TAXABLE?

Bitcoin is a virtual currency that uses a cryptographic encryption system to facilitate secure transfer and storage. Unlike the fiat currency, it’s not printed by the central bank nor backed by any. Bitcoins are generated by mining. It can be used like any other fiat world currency to buy goods and services. Bitcoin is now listed on the exchange and has been paired with world-leading currencies such as US Dollar and Euro. Around the world, tax authorities have tried to bring forth regulations on Bitcoin .the US Internal Revenue Service (IRS) and counterparts from other countries are on the same page when it comes to Bitcoin taxation .the IRS said Bitcoin should be treated as an asset since it’s not offered by the Central Bank of a country, thereby making the tax implication clear.

Bitcoin Taxable Events

Worryingly, it seems that most taxpayers are unaware of the rule that dictates their tax obligations in regard to cryptocurrency. The IRS has made it mandatory to report all Bitcoin transactions of all no matter how small in value. Thereby keeping a record of buying, selling of, investing in, or using Bitcoin to pay goods and services is essential .considering that Bitcoins are treated as assets, thereby in any transaction, you will incur a capital gain tax. The following are the transactions that will lead to taxation.

• Selling Bitcoins mined personally to a third party.
• Selling Bitcoin bought from someone to a third party.
• Using Bitcoin, which may have mined, to buy goods or services.
• Using Bitcoin bought from someone to buy goods and services.

Conclusion

Taxation on Bitcoin profits and its reporting are not as simple as it sounds. For starters, it’s difficult to calculate the fair value of Bitcoin on purchase and sale transactions. Additionally, the frequent traders could use their first in and first-out (FIFO) to account for their tax obligations. The individual is responsible for maintaining the records related to Bitcoin dealings.

Disclaimer: The blog content above does not constitute financial advice in any way whatsoever. Nothing published by LinqCash constitutes an investment recommendation, nor should any data or Content published by LinqCash be relied upon for any investment activities.

LinqCash strongly recommends that you perform your own independent research and/or speak with a qualified investment professional before making any financial decisions.