Or any other cryptocurrency, that counts as ordinary income. When you get paid for services via bitcoin Excess losses beyond that can be carried forward to future tax years. When yearly annual loses exceed yearly annual gains, the taxpayer gets to also deduct up to $3,000 a year. If the value goes down and the investor sells at a loss, they get a capital-loss deduction.
So it’s important to remember the tax treatment for losses, said Ben Weiss, chief operating officer and co-founder of CoinFlip, which has bitcoin ATMs in 1,800 locations allowing people to buy and sell cryptocurrency. For example, shortly after bitcoin’s market value hit the $1 trillion mark, it was on the cusp of entering a bear market. That’s still a lower rate than five of the seven income-tax brackets.īut cryptocurrency is volatile stuff. Pretty much everyone else gets a 15% rate, with the rate applying to incomes up to $445,850 for individuals and $501,600 for married couples filing jointly. A single filer making under $40,400 and a married couple making under $80,800 get a 0% rate. If the sale happens at least one year after the acquisition, that’s a long-term capital gain. That is taxed as ordinary income, which means it is lumped with other things like wages and taxed at a marginal rate corresponding to the bracket the taxpayer falls into. If a sale at a profit occurs within a year of purchase, the proceeds count as a short-term capital gain. If value goes up and the owner sells at a profit, they’ll likely pay capital-gains tax. It’s helpful to remember tax rules that also apply on stocks. The IRS treats cryptocurrency as property. The basics on how the IRS views cryptocurrencies Here’s a primer on some tax-time issues when it comes to cryptocurrency. Some transactions can spur multiple tax events at once, but tax professionals have scant IRS guidance to work off, he said. “It can be super, super easy, or it can be insanely complicated,” said Matt Metras of MDM Financial Services in Rochester, N.Y.
As more people eye cryptocurrencies, more people have to face up to the tax rules at play. Last week, bitcoin hit an aggregate value above $1 trillion. So much so that it has tweaked the first page of Form 1040 - the main piece of income-tax paperwork taxpayers file yearly - to ask taxpayers if they’ve received, sold, sent, exchanged “or otherwise acquire any financial interest in any virtual currency?” A “yes” could mean more taxes, but not necessarily, tax experts told MarketWatch.Ĭryptocurrencies keep achieving a progressively higher profile.
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