Do Bitcoin traders, exchanges and owners pay tax?

Do Bitcoin traders, exchanges and owners pay tax?

Bitcoin
December 9, 2019 by cryptogavel
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Bitcoin though a currency, is an asset. And like every other asset, bitcoin is taxable. Tax is according to the Oxford Dictionary is a compulsory contribution to state revenue, levied by the government on workers’ income and business profits, or added to the cost of some goods, services, and transactions. According to Ryan Losi, a
Do Bitcoin traders, exchanges and owners pay tax?

Bitcoin though a currency, is an asset. And like every other asset, bitcoin is taxable. Tax is according to the Oxford Dictionary is a compulsory contribution to state revenue, levied by the government on workers’ income and business profits, or added to the cost of some goods, services, and transactions.

According to Ryan Losi, a certified public accountant and the executive vice president of Virginia accounting firm if you sold crypto or used same to buy anything, then you owe the IRS a tax. This is the position in the United States. Thus in the united states, bitcoin, just like any other asset that fetches gain, is taxable. In 2014, the IRS first issued official guidance on how to treat virtual currencies, which provided that they are considered property.

Buying Bitcoin is not a taxable event. But using Bitcoin to buy something else is considered a sale of Bitcoin and selling property for more than you purchased it for is a taxable event.

The IRS in their guideline providing for the taxation of Bitcoin, stated vividly that;

The sale or other exchange of virtual currencies, or the use of virtual currencies to pay for goods or services, or holding virtual currencies as an investment, generally has tax consequences that could result in tax liability.

A clear understanding of this will tell you what actually is being taxed.

The consistent rise in the value of cryptocurrency has propelled many government to consider taxing them. However, not all countries tax cryptocurrencies. Thus there are still some  bitcoin- friendly countries. Hence, the answer to the question, whether bitcoin is taxable is dependent on the country in question.

So generally, Not all transaction done with bitcoin is taxable. Thus while answering the question whether bitcoin is taxable, in addition to considering the country and its tax guideline regarding bitcoin, it is also paramount to consider the transaction done with the bitcoin. This is because, while the purchase of bitcoin is not taxable, the sale of it and the use of it to pay for goods and services is taxable.

Sometimes, thee question is, since what is being taxed is the gain or benefit derived from bitcoin, what happens when a bitcoin is sold at a loss?

In a nutshell,Selling Bitcoin at a loss will generate short or long term capital losses which can be used to offset capital gains.

Thus transaction and jurisdiction are two main factors to determine if a bitcoin can be taxed.

 

 

 

 

 

 

 

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