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IRS recognizes bitcoin

Posted on: March 26th, 2014 by jms 1 Comment

The IRS announced that Bitcoin will be treated as a property, not a currency for tax purposes. The same regulation will also apply to other forms of “digital currencies”. This announcement is good news for Bitcoin investors because, as a  property investment, gains will be taxed as capital gains, meaning lower taxes for any profit made from an investment in Bitcoins. The downside is, more record keeping will be required for all transactions done with Bitcoins. This can prove to be a hard to manage for merchants who accept Bitcoins as payment. Every transaction will need to be treated as a stock trade, so to speak, with the loss or gain of that transaction being accounted for in bookkeeping, a characteristic not currently associated with typical currency transactions.

 

There is still time to tweak this new regulation in order to make things easier for record keeping, and it is likely that better solutions are still to come. All and all, this is a great step forward for Bitcoin lovers and investors, especially for those of us who bought into Bitcoin during high points, and can now claim a loss if the value of Bitcoins do not reach those original costs at the time.

 

 

Sources:

 

http://www.boston.com/business/personal-finance/2014/03/25/irs-categorizes-bitcoin-property-not-currency/LbsJtDY55xi5W0K8trwUWN/story.html

 

http://www.businessinsider.com/irs-bitcoin-is-property-not-currency-full-release-2014-3