] The first thing to know about Bitcoin is that it is property in the eyes of the IRS. Despite how you may view it or use it, the IRS says for tax purposes, bitcoin and other digital currencies are not currency; they're capital assets, which means they're taxed like stocks.
Is bitcoin a capital asset?
Because the IRS treats Bitcoin as a capital asset, it is subject to general tax principles. If you invest in Bitcoin and then sell or trade it for a higher price than you bought it for, you owe capital gains taxes.
How much is cryptocurrency taxed?
According to cryptocurrency tax software TaxBit – which recently contracted with the IRS to aid the agency in digital currency-related audits – tax rates vary between 10%-37% on mining proceeds. “Crypto miners have to pay taxes on the fair market value of the mined coins at the time of receipt,” wrote crypto tax attorney Justin Woodward.
How does the IRS treat cryptocurrency?
The IRS treats virtual currencies like bitcoin as property, meaning that they are taxed in a manner similar to stocks or real property. The agency recently ramped up efforts to subpoena centralized crypto exchanges for information about noncompliant U.S. taxpayers.
