Friday, January 9, 2015

Bitcoins and Your 2014 Tax Return Bitcoins lost more than half their value in 2014 so bitcoin owners can file for capital losses as a result.

Kent McDill for Millionaire Corner writes:  In March of 2014, the Internal Revenue Service made a decision regarding bitcoins, and that decision will affect the tax returns of anyone who sold a bitcoin or paid for something using the new virtual currency.

“Currency’’, in this case, is a controversial word because the IRS decided that virtual currency like bitcoins is not, in fact, a currency, but instead is property and is treated that way for tax considerations.

What that means from a tax standpoint is that any exchange of bitcoins from buyer to seller is subject to the same tax considerations of property, and the main tax consideration is capital gains.
The good news for bitcoins users is that the value of bitcoins plummeted in 2014, and it is likely the value paid for the bitcoin was higher than the value it had when it was sold or used for a purchase. The bad news is the bitcoin owner has to prove it.

Starting from the beginning, bitcoins are, according to the IRS, “a digital representation of value that functions as a medium of exchange, a unit of account and/or a store of value.” Their value is determined in a similar way to the way company stock is valued, and as such, the value changes many times every day.

The IRS looks at bitcoins just as they do company stock, and Americans are taxed (for capital gains) on the positive difference between what is paid for the property and what is received back when the property is sold. In the case of bitcoins, “sold’’ includes “used in transaction” as many companies now accept bitcoins for purchase.[snip]/ The article continues @ Millionaire Corner, click here to continue reading....

1 comment:

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