Assets, Bitcoin

Is Bitcoin Taxable in USA?

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. 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. They can be exchanged for other currencies, products, and services.

NOTE: WARNING: Bitcoin is a virtual currency, and while it has some similarities to actual currency, it is not considered legal tender in the United States or any other country. As such, the taxation of Bitcoin transactions is still a developing area of law and the current regulations are constantly changing. Therefore, it is important to consult a tax professional before engaging in any Bitcoin transaction to ensure that you are aware of your tax obligations.

As of February 2015, over 100,000 merchants and vendors accepted bitcoin as payment.

The Internal Revenue Service (IRS) has not yet issued guidance on how to treat bitcoin from a tax perspective. However, the IRS has issued guidance on how it will treat certain types of transactions involving virtual currency.

Based on the IRS guidance, it appears that bitcoin should be treated as property for tax purposes. This means that any gains or losses from the sale or exchange of bitcoins would be subject to capital gains taxes.

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