Bitcoin taxes: Understanding the rules and how to report cryptocurrency on your return

Bitcoin taxes: Understanding the rules and how to report cryptocurrency on your return

Although used as a currency, Bitcoin is taxed like an investment, and you might be liable for any profits made when you sell or spend it.







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The IRS considers Bitcoin to be property rather than money, so transactions are subject to the same tax treatment as other investments.

Bitcoin taxes can be triggered by trading, exchanging, or simply spending the cryptocurrency, so documenting everything is essential. 

Bitcoin is taxed at the special capital gains tax rate, which is often less than the ordinary income tax rate.

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Bitcoin seems to be everywhere these days. From its mysterious origins in 2008, it has grown into a widely accepted currency, used for everything from investing to shopping to employees' wages. 

But many Bitcoin users don't realize that buying/selling, exchanging, and even using Bitcoin to pay for things has tax implications. Yes, you read that last phrase right. In some cases, just spending your Bitcoin could be considered a profitable investment “” and taxable.

From how exactly it's taxed to how to prepare for filing, here's what you need to