the_darkness
Member
So for any crypto users in the US, today the IRS announced their approach to taxation of Bitcoin, which will presumably set the precedent for any other cryptocurrency, including Darkcoin: http://blogs.wsj.com/totalreturn/2014/03/25/qa-the-new-irs-rules-on-bitcoin/
Original document: http://www.irs.gov/pub/irs-drop/n-14-21.pdf
The key highlights include:
Hard to say. Treating crypto as property is somewhat good in that it means it will behave like a stock. E.g. if you just hold it over a year you will not realize any tax costs. You only will be taxed if it is sold for fiat. It's less clear how trading alts for bitcoin will be treated; I suspect that would also count as a capital gain. This decision will definitely encourage the use of cryptos more as investments like stocks and less as currencies. There is a silver lining in that currencies are subject to significant regulation, but it does potentially complicate the use of cryptos in commerce. In particular it means that any time you transformed DRK to something else (e.g. alternative coin, goods online, etc.) you will technically have to keep a record. This will make it difficult to justify using cryptos for everyday purchases, as it would be like selling your stock in Google to pay for your morning coffee etc. The info available seems to say they're mostly interested in practice in transfers of $600 or more however so day-to-day purchases may still be possible.
If nothing else it's good that there are clear rules as the biggest risk to cryptos is regulation. The uncertainty around that is likely preventing a lot of people from buying in. If there is a clear rulebook to play by then more people may get interested in crypto opportunities.
Original document: http://www.irs.gov/pub/irs-drop/n-14-21.pdf
The key highlights include:
- crypto will be treated as property, not currency; hence if you sell a crypto it will be a capital gain
- mining will count as a trade where you are generating income; you will thus have to treat it as income and may need to pay self-employment tax
- being paid in coins also will count as income and be taxed accordingly per the market value on date of receipt
- coins will be valued based on a "reasonable" conversion to USD
- there are potentially onerous record-keeping issues for people using crypto as currency, as technically any time you exchange crypto for more than your purchase price (e.g. buy at $5 and sell at $10 valuation) you will be incurring capital gains
- However generally the IRS does in the past has not been interested in payments below $600
- individuals who did not file taxes on bitcoin profits in the past may be subject to penalty, although a vague penalty relief clause may be available if there were "reasonable" reasons for not filing
Hard to say. Treating crypto as property is somewhat good in that it means it will behave like a stock. E.g. if you just hold it over a year you will not realize any tax costs. You only will be taxed if it is sold for fiat. It's less clear how trading alts for bitcoin will be treated; I suspect that would also count as a capital gain. This decision will definitely encourage the use of cryptos more as investments like stocks and less as currencies. There is a silver lining in that currencies are subject to significant regulation, but it does potentially complicate the use of cryptos in commerce. In particular it means that any time you transformed DRK to something else (e.g. alternative coin, goods online, etc.) you will technically have to keep a record. This will make it difficult to justify using cryptos for everyday purchases, as it would be like selling your stock in Google to pay for your morning coffee etc. The info available seems to say they're mostly interested in practice in transfers of $600 or more however so day-to-day purchases may still be possible.
If nothing else it's good that there are clear rules as the biggest risk to cryptos is regulation. The uncertainty around that is likely preventing a lot of people from buying in. If there is a clear rulebook to play by then more people may get interested in crypto opportunities.