{"id":3042,"date":"2020-02-26T00:00:00","date_gmt":"2020-02-26T00:00:00","guid":{"rendered":"https:\/\/xcoins.com\/blog\/bitcoin-taxes-what-us-citizens-should-know\/"},"modified":"2022-11-02T10:52:28","modified_gmt":"2022-11-02T10:52:28","slug":"bitcoin-taxes-what-us-citizens-should-know","status":"publish","type":"post","link":"https:\/\/xcoins.com\/en\/blog\/bitcoin-taxes-what-us-citizens-should-know\/","title":{"rendered":"Bitcoin Taxes: What US Citizens Should Know"},"content":{"rendered":"\r\n

Owning bitcoins will affect your taxes.<\/p>\r\n\r\n\r\n\r\n

A lot of traders don\u2019t seem to know that. According to\u00a0reporting<\/a>\u00a0by CNBC, on one tax platform alone less than 1 in 2,500 people reported their cryptocurrency gains this year. They\u2019re hardly alone, but there\u2019s also no ambiguity here. The IRS taxes cryptocurrency that gains value.\u00a0<\/p>\r\n\r\n\r\n\r\n

So here are a few things you\u2019ll need to know about the relationship between bitcoins and taxes:<\/p>\r\n\r\n\r\n\r\n

Income is anything that makes you richer.<\/h2>\r\n\r\n\r\n\r\n

First and foremost, the IRS takes a much more expansive definition of taxable income than most people realize.<\/p>\r\n\r\n\r\n\r\n

\u201cIncome\u201d for the purpose of annual taxes is anything that makes you richer than you were before. Yes, this includes putting money in your pocket (no matter what the source), but it\u2019s a lot more than that. Investments that go up, items that gain value, acquisition of new property\u2026 it all counts.<\/p>\r\n\r\n\r\n\r\n

Did your portfolio have a good year? Did you win a pair of high-priced football tickets? Did a friend notice that old painting on the wall and point out that it\u2019s actually worth $1,000? The IRS wants to know, and they won\u2019t be happy if they don\u2019t hear from you.<\/p>\r\n\r\n\r\n\r\n

And that includes cryptocurrencies, because\u2026<\/p>\r\n\r\n\r\n\r\n

Currencies aren\u2019t just currency for tax purposes.<\/h2>\r\n\r\n\r\n\r\n

The IRS views cryptocurrency as a hybrid of investment and capital. This is not unique. Any currency holdings can fluctuate in value compared to the U.S. dollar, and when they do, the IRS treats that as a taxable event. A forex trader who purchases $1 million worth of euros and sits on them until they gain value against the dollar will trigger a tax liability.<\/p>\r\n\r\n\r\n\r\n

The same is true of cryptocurrency. As a bitcoin gains value against the dollar, its owner has accrued wealth.\u00a0<\/p>\r\n\r\n\r\n\r\n

Taxes don\u2019t just trigger upon sale.<\/h2>\r\n\r\n\r\n\r\n

It may be clear that you have to pay taxes when you sell your crypto portfolio and make a bundle. What is less clear is that this is not the only taxable event which can trigger. Here are just\u00a0some<\/em>\u00a0examples of other situations where cryptocurrency trading can affect your tax liabilities:<\/p>\r\n\r\n\r\n\r\n