How is bitcoin taxed in the US?

U.S. taxpayers must report Bitcoin transactions for tax purposes. Retail transactions using Bitcoin, such as purchase or sale of goods, incur capital gains tax. Bitcoin mining businesses are subject to capital gains tax and can make business deductions for their equipment. Bitcoin hard forks and airdrops are taxed at ordinary income tax rates.

Should you report bitcoin profits on your tax return?

Depending on when you bought and sold your bitcoin — as well as other factors, such as your income — you could be on the hook to pay. Here’s what you need to know about reporting crypto profits on your 2020 tax return. The IRS classifies virtual currencies as property. What does that mean?

How to prepare a bitcoin/cryptocurrency tax filing?

Thus, the first step in preparing a Bitcoin/cryptocurrency tax filing is to ensure that gain and loss for individual transactions is accurately computed. This information should be input on a Form 8949 for each transaction or other reportable events.

Do you have to pay capital gains tax on bitcoins?

Because bitcoins are being treated as assets, if you use bitcoins for simple transactions such as buying groceries at a supermarket you will incur a capital gains tax (either long-term or short-term depending on how long you have been holding the bitcoins).