When it comes to Bitcoin, taxes are a hot topic. There are those who believe that Bitcoin should be taxed like any other asset, and then there are those who believe that Bitcoin should be exempt from taxation. So, what is the truth? Do you pay taxes on Bitcoin if you don’t sell?
The answer is yes and no. If you don’t sell your Bitcoin, you don’t have to pay any capital gains tax.
However, if you use your Bitcoin to buy goods or services, you will have to pay VAT or sales tax on those purchases.
NOTE: WARNING: Taxpayers who use virtual currency, such as Bitcoin, must pay taxes on any gains they make from their transactions. Even if you do not sell your Bitcoin, you may still owe taxes on the gains you have made. It is important to understand the tax implications of using virtual currency and to report all gains accurately on your tax return.
There are also a few other instances where you might have to pay taxes on your Bitcoin. For example, if you mine Bitcoin, you will have to pay income tax on the profits you make.
And if you inherit Bitcoin from someone else, you may have to pay inheritance tax.
So, in short, whether or not you pay taxes on Bitcoin depends on how you use it. If you simply hold onto your Bitcoin and don’t do anything with it, then you probably won’t have to pay any taxes.
However, if you start using your Bitcoin to buy things or pay for services, then you may have to start paying taxes on those transactions.
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Bitcoin is a decentralized digital currency, without a central bank or single administrator, that can be sent from user to user on the peer-to-peer bitcoin network without the need for intermediaries.[7] Transactions are verified by network nodes through cryptography and recorded in a public distributed ledger called a blockchain. Bitcoin is unique in that there are a finite number of them: 21 million. Bitcoins are created as a reward for a process known as mining.
The Tax Cuts and Jobs Act of 2017, signed into law by President Donald Trump, has major implications for cryptocurrency investors. The legislation, which went into effect on Jan.
1, 2018, essentially classifies cryptocurrency as property for tax purposes. This means that any gains or losses from buying, selling or trading cryptocurrency are subject to capital gains tax.
