Whenever bitcoin is bought, sold, or traded, there are tax impacts. We’ll discuss how bitcoins and other forms of virtual currency are taxed, and point out record keeping requirements and tax planning techniques that can be utilized. At the end you’ll find resources for continuing your own research.
The big picture:
“The key thing going forward is maintaining records, substantially similar to stock,” says Jason Tyra, a certified public accountant in Texas who specializes in bitcoin; “Incomplete records might as well be no records.”
Why is record keeping such an important topic? Maintaining records is essential for accurately measuring bitcoin-related income.
When it comes to taxes, the Internal Revenue Service has ruled that bitcoins and other “convertible virtual currencies” are “treated as property” and not treated as currency. This concise guidance from the IRS has implications for how bitcoins are taxed, what information is needed to make sure taxes are calculated correctly, and what tax planning techniques people can use to minimize their taxes on Bitcoin transactions.