IRS Bitcoin Ruling Could Complicate Online Transactions
March 31, 2014
An IRS ruling on the tax implications of Bitcoin could have long range effects on its viability as an online medium of exchange. The federal agency late last week said for the purposes of taxation, the U.S. government considers Bitcoin property rather than currency. Since it’s classified as property, Bitcoin is now subject to capital gains taxes. While experts say this could be good or bad, depending on whether investors post a gain or a loss, it could make actually using Bitcoin to buy things much more complicated.
According to the guidance, any time someone uses Bitcoin to make an online purchase, it would trigger a capital gain or loss depending on whether Bitcoin had appreciated or depreciated since the user acquired it.
The IRS has published a document with background information on the ruling and to answer frequently asked questions.