What To Know About Bitcoin And Taxes

Source: greentradertax.com.

Yes, it’s that time of year again. The new year is upon us and we all need to start gathering tax documents. Fun stuff, right? And if you’ve invested in bitcoin or sold bitcoin, then things get really fun.

The below list of items is meant to help you understand the most critical aspects for tax filing when it comes to bitcoin. And it should be noted that this specifically covers U.S. taxes (though U.K. regulations are very similar).

Here’s what you need to know:

1. Bitcoin Is Taxed As Property

That’s right, just like stocks, bonds or real estate. Although often used as currency, it is not treated like a currency for tax purposes. Every single time you sell, spend or exchange bitcoin, you have executed a taxable transaction. You have a capital gain or less every time you dispose of your bitcoin, unless it is by gifting it to someone.

I know what you’re thinking. Well, I know what I’m thinking, anyway: This necessitates a lot of detailed record keeping. In order to compute capital gains and losses, you need to know your original cost basis. Now, crypto exchanges will keep a history of all of your transactions, but they won’t be reporting your cost basis to you on any regular basis. In addition, if you’ve moved coins or taken self-custody, you really need to keep track of all your coins and their original costs. I’m thinking a nice Excel spreadsheet. And stay up on it regularly. Your tax accountant will be pleased.

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