Bitcoin Forum

Do you consider it as capital gains tax?

Yes I do, just look at the many times in history where major criminals were arrested for tax evasion in lieu of other evidence (Al Capone being a notable example). Don't want to give them any more reason to scrutinize my finances, I'd have a hard time explaining where a lot of my income comes from.  ;)

doesn't work like that in australia. you're supposed to declare any income earned and pay tax on it's AUD equivalent, whether you cashed out or not.

How much are you guys paying in the USA?

Do I understand correctly, if my idea on this is, that as long as I only collect bitcoins and don't exchange them for items or usd/eur I should not include them to my tax report?

You can't tax unrealized capital gains.

Related:
 - http://en.bitcoin.it/wiki/Tax_compliance

if a US citizen accumulates millions of AUD, EUR, YEN, WON... is that just unrealized capital gains?

government will eventually include BTC in that list one way or the other, no matter how many try to argue that it's just a commodity, etc.

Other currencies are not unrealized tax gains, those are already realized.

You should see BTC more as stocks, only taxable once sold.

as i said, governments will eventually put BTC in the list of 'currencies' if for nothing else but taxation purposes.

buddy don't speculate, and no i doubt it will be put on a list as currency, usually anything the government can't control won't be given such luxury

 I think so.

This is pretty much what my accountant said word for word when I asked him. Sure if it's recognized as a currency that will change, but it isn't.

If BTC were to be made "centralized" then yeah why not

US CITIZENS, HOW MUCH ARE YOU PAYING AS CAPITAL GAINS TAX???????????????????

Oh, you are just asking for the rate at which long term capital gains are taxed?  15% (for most, from 0% to 28% for others)
 - http://www.irs.gov/newsroom/article/0,,id=106799,00.html
 - http://en.wikipedia.org/wiki/Capital_gains_tax#United_States
 - http://www.bankrate.com/finance/money-guides/capital-gains-tax-rates-1.aspx

So if I play World of Warcraft and in a raid I get an item I could sell for $30, I have a taxable gain of $30? Do I have to pay taxes every time I level up -- after all, I could sell my account.

So do people in Australia not play MMORPGs? Or do they all break the law?

i don't pay taxes on bitcoins

That's the law in the United States. Capital gains are not taxed until realized. But read what payb.tc said, "you're supposed to declare any income earned and pay tax on it's AUD equivalent, whether you cashed out or not". I don't see how such a system could possibly work. It would mean that if you acquired any virtual asset you could sell (such as an MMORPG account with characters and items), you'd have to pay taxes on its increase in value.

The food, electricity, and fuel *are* cashing out. When you acquire a consumable good and then consume it, you are cashing out.

No, but that's because spending it or trading it for a good you then consume is cashing out. The question is whether you have to pay tax on *unrealized* capital gains. That is, assets you hold that have some value but that you have not put into either a hard currency or a form in which they can be consumed.

At least in the United States, Bitcoins are just like items in an MMORPG. You can acquire them, hold them, and they can go up in value tax free. If you lose them or they go down in value without you ever cashing out, no taxes are due. Until you convert them into hard currency or exchange them for a commodity you intend to consume, no taxes are due. Your tax basis in the Bitcoins would typically be deductible (I'm oversimplifying a bit here. There are some exceptions.)

I don't think anyone knows the answers to those questions yet. At least, so far as I know, there's no precedent to make the answers to those questions "yes". As I understand it, you can accumulate a virtual fortune (whether in the form of stocks or items) and pay no taxes until you "cash out" into something you can physically consume. (Or something the government recognizes as hard currency, with some exceptions.)

you know, this never really crossed my mind until just now...

is it worth moving to usa from canada?

Hi for those of you paying taxes on US capital gains tax, how much do you make per year with BTC?

One person said 15%, but 15% of what?

Right.  Although I'm not a lawyer, I'd assume it's not taxable until it's real money.

Another way of saying it is that if it's not USD it's not taxable.

If a buddy of mine gives me three socks and a hat in exchange for breakfast, thats' not taxable, as it's not USD.

I guess BTC will always have this advantage, as it is a foreign currency.

No, don't be rash. Visit on holidays, marry a Yankee if you dare, but move? Why? Canada is a very nice, clean, and uncomplicated place.

15% of whatever your capital gains were for the year.   So let's say I bought 100 BTC at $0.25 (100 X $0.25 = $25) in November 2010 and then did a stupid move like sell all 100 for $2.50 (100 X $2.50 = $250) in December 2011.  The capital gain on that long term investment then was $225 ($250 - $25).  The capital gains tax then, at a 15% rate, would be $33.75.

But I'm guessing you are not asking how to compute the capital gains tax but instead are asking for people to tell you the actual amount of capital gains tax that they paid.  For most people that is considered to be private information.  In some cultures it is considered rude to even ask.

Racking up losses ends up being more of a long-term benefit in that an individual can only claim a net capital loss of $3000 per year, so the major benefit to losses is offsetting taxable capital gains. Personally, I think $3000 is a ridiculously low number that must be a historical artifact, but I can also see some obvious opportunities for abuse were one allowed to use unlimited capital losses as an offset against current income, as all it would take is a little collusion to make it a win-win for the participants.

I don't pay American taxes either, at least not for the past 4 years. 10 years ago I fantasized I might actually have enough historic losses racked up to never have to pay taxes again, but then I screwed that up by achieving the best investment results of my entire life in the past decade, now it looks like I may actually have to make a tax payment in the next 5 years or so. Given my survival expectancy to that time is less than 20%, I'm not worried about it  ;D

From what I know hobby is not taxed in AU. If you make an odd income or obviously too labour intensive for reward it is not taxed.
http://www.ato.gov.au/corporate/content.aspx?doc=/content/00199712.htm (http://www.ato.gov.au/corporate/content.aspx?doc=/content/00199712.htm)

interesting. How do you prove gains and losses?

for arguments sake we have an exchange ourbitcoin.

1) I trade 10000USD at 5.00 for 2000 BTC. It drops to 0.5, so I have lost 9000USD.

2) I "trade" 10000USD at 5.00 for 2000 BTC, the exchange disappears. So I have lost 10000USD

3) I "trade" 10000USD at 5.00 for 2000 BTC on an exchange that disappears, but sent it to a.n.other exchange.


How would you and/or the IRS/revenue-service-of-your-country prove or disprove gains/losses?


marked

How do you write off those gains when you cash out?

Where do you say they came from? That'd be an interesting conversation to have with the IRS...

Google "Publication 550". That has most of the answers you are looking for. The US considers Bitcoins as commodities for income tax purposes. Each tax payer is required to report his own realized gains and losses on each transaction.

Disclaimer: I am not a tax attorney. I am not an accountant or CPA. I suggest you consult with your tax adviser to discuss your own personal situation.

You never had any gains or losses there.  The IRS only taxes income that is "recognized and realized," which means that you have to "cash out" in order for it to be taxable.  If you had sold in example 1 you would recognize a loss.  You don't recognize a loss from just having the currency drop in value.

So it doesn't sound like anyone has agreed they have paid taxes on bitcoin capital gains (on the commodity known as bitcoin).  Nor has anyone admitted they have paid taxes on their "bitcoin income."

I have a spreadsheet which tracks both my mining operations as well as my trading gains & losses.

I'm currently in the red on both ventures (not too surprising).

I hope to turn a profit during 2012 and will deal with the issue for my tax return due April 2013; however, is anyone willing to admit they paid taxes due April 17, 2012?

Otherwise, I'll assume there are no people compliant which is probably a fair assumption for now.

You are asking for private information to be shared on a public forum.  Just because nobody responds to your nosy inquiry doesn't mean they aren't handling things properly.

I avoid the direct transfer of bitcoin into any time of government monitored currency so I don't really have that problem.

Just stick to low key online services which accept bitcoins as a form of payment.

This is why having a well paying corporate job pays off in the end kids :)

https://bitcointalk.org/index.php?topic=76938.0

US doesnt even pay that much anyways. we Canadian buys or bitcoins from american. SO if it sucks for them it sucks for us

That's not how the tax system works in the United States. Other than the specific cases where there is mandatory reporting, neither you nor the IRS needs to prove anything.

Taxes are due by midnight!

If USD is made we are supposed to claim it. It seems BTC turned into USD would be taxed as additional income but I am no CPA.
Made 50K USD plus 1K USD from BTC. 51K USD to tax as far as the IRS sees it.
Not being recognized as anything of value by government it doesn't seem to fit capital gains tax.

Yeah I can't imagine the us government wasting any more money as it is to investigate claims of possession of anonymous currency so I would say all the tax dodgers and illegal buisiness owners are safe for now.

Besides the bitcoin more than likely will be profitable in the long run especially seeing as how the endurance of the currency is implied by the very algorithm that runs it.

It all depends *how* you make it. If it was earned income (like a salary paid in bitcoin), then it would be taxed as a barter even if you haven't sold the bitcoins. If it was a gift, it would be taxed as a gift.

It doesn't matter whether the government considers it a thing of value or not. If you bought it for price X and sold it for price Y, that could be a capital gain. If you received it in exchange for labor, it's a barter.

the algorithm doesn't imply anything other than the technical merit.  profitability has nothing to do directly with the technical details of bitcoin.  the algorithm enables the things that give bitcoin its value, specifically the security to allow it to be used as a value transfer mechanism, but its the actual use that gives it its value.

you want bitcoin to be worth more?  spend your bitcoins on products and services.  ironic i know, but there you go.

Interesting thread. One thing I was considering is starting an LLC for to operate BitCoin mining rigs under. I have a few other business ideas that I have been floating that could operate under the same LLC and if it worked I would be able to separate my personal finances from the LLC’s I then give myself a salary (in the off chance I actually made money). I doesn’t cost much to start an LLC and it offers some protections from taxes and liabilities. For instance all your equipment and power investment can be written off as a loss. You can also write off the deprecation of your equipment as it ages. I have no idea if any of this is relevant or even worthwhile, it’s just something that was rattling around in my head. 

tax is intermediary when online exchanges are concerned
it is taken off when u initiated sumthing from ur bank or exchange fees

isn't the entire point of BTC to get around this?

+1  :D

no

+1

The point of BTC is not tax evasion. The point is actually being able to own and transfer your own money.

btc is supposed to be independent of other currencies, so you shouldn't be taxed at all.

That isn't true.  If you got paid in chickens, you would pay taxes based on the USD value of the chickens. It doesn't matter that you aren't paid in USD.

Which by itself is a way to evade the worst tax of all: inflation. If you like giving your wealth to your government, than keep using fiat.

BTC is a good tool for tax evasion in internet transactions. I just hope more and more people realize it.

FTFY.

With the large numbers of [day/short-term] traders out there Today, this question seems relevant more than ever.

Do most/all exchanges work under the premise that the traders are responsible for reporting about profits/losses  at their country of origin ?

IF an Exchange is cooperating with global authorities/regulators [according to customer's country of origin] , is it doomed to fail ?
 will traders keep away from Exchanges that work with regulators ?