Trading Bitcoin? Inform Capital Gains to IRS
Whether you are a trader or an investor in Bitcoin, the IRS is getting stricter on you as from now onwards you have to mention the capital loss or gains to them. The gains or losses you made on sales and exchanges will now have to follow the tax treatment.
This regulation is specifically for those whose capital asset is Bitcoin. IRS has decided to consider cryptocurrencies like BTC to be an intangible property. Even if the trader experience loss or gain while trading Bitcoins on Bitcoin exchanges, they need to report the capital used.
You won’t escape the new policy even if you don’t convert them into U.S dollars. All your transactions with Bitcoins either buying them or selling them need to be reported from now. This reporting can be made in two ways as jotted below:
1. For every sale transaction and purchase, convert Bitcoin to U.S dollars via Bitcoins market price on that day denominated in dollars.
2. Report Bitcoin as your functional currency for that particular tax year and use an average Bitcoin vs. U.S dollar conversion rates.
Irrespective of the fact, whether you bring back the finances back to U.S after losses or gain something out from Bitcoin trades if you are a taxpayer resident of America, you have to make sure that you explain your exchanges to the IRS.
There are certain advantages having cryptocurrency as a capital asset like you can hold off it’s reporting by making the use of realization method and not disclosing the capital gain or loss until concluding the position.
Sometimes there are chances of gains or losses that remain unrealized until the year-end. Make the maximum use out of it. You can also make the use of long termed capital gains that are lower as compared to the short termed capital gains, which will be then taxed as ordinary.
For each Bitcoin trade, you can attach a report from your broker rather than giving each report individually, making your work easy and quick.