100% Accurate Calculations Guarantee – Individual Returns: If you pay an IRS or state penalty or interest because of a TurboTax calculation error, we'll pay you the penalty and interest.Like stocks or bonds, any gain or loss from the sale or exchange of the asset is treated as a capital gain or loss for tax purposes. General tax principles applicable to property transactions apply. When you hold Bitcoin it is treated as a capital asset, and you must treat them as property for tax purposes. As with stocks or bonds, any gain or loss from the sale or exchange of your Bitcoin assets is treated as a capital gain or loss for tax purposes.īitcoin held as capital assets is taxed as property TurboTax Tip: When you hold Bitcoin, it is treated as property for tax purposes. Self-employed individuals with Bitcoin received as income also must convert the virtual currency to dollars as of the day received, and report the figures on their tax returns. Wages paid in virtual currency are subject to withholding to the same extent as dollar wages.Įmployees are required to report their total W-2 wages in dollars, even if earned as Bitcoin.dollars as of the date each payment is made and keep careful records. You must convert the Bitcoin value to U.S.
If you are an employer paying with Bitcoin, you are required to report employee earnings to the IRS on W-2 forms. Below are some tips using Bitcoin as an example:īitcoin used to pay for goods and services taxed as income Tax treatment depends on how a virtual currency is held and used. The IRS answered some common questions about the tax treatment of virtual currency transactions in its recent IRS Revenue Ruling 2019-24 and its Frequently Asked Questions article.
The sale or exchange of a convertible virtual currency-including its use to pay for goods or services-has tax implications. It's called a convertible virtual currency because it has an equivalent value in real currency. dollar value of the virtual currency on the day the payment was received.Ĭonvertible virtual currency is subject to tax by the IRSīitcoin is the most widely circulated digital currency or e-currency as of 2022. If you “mine” Bitcoin, you’ll report the gross value of these earnings as income on your taxes, based on the U.S.dollar value of each Bitcoin payment on the date it was received. If you are self-employed and receive payment with Bitcoin, you are required to report all income in U.S.dollars, even if some or all of your wages were paid with Bitcoin. If you are an employee, you report your total W-2 wages in U.S.dollar value of each Bitcoin payment on the date it was made. If you are an employer and pay employees using Bitcoin, you are required to report employee earnings to the IRS on W-2 forms, using the U.S.
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