Paying Taxes With Bitcoin Is A Win-Win-Win

[macson]

From what I see, the US government benefits most because they can acquire a significant amount of Bitcoin from taxpayers, which they can then transfer to their strategic reserve. This approach allows them to build a massive strategic reserve of Bitcoin without having to buy directly from the market, allows them to accumulate more Bitcoin without spending a single penny. And with their ability to seize Bitcoin from criminal activity will significantly accelerate their accumulation, making the US the largest Bitcoin nation-state in the world with no acquisition costs.

As for taxpayers, they are losing out on Bitcoin that could potentially appreciate in the long term, reaching a much higher value. While it's their decision whether or not to use it, I personally think it's quite a loss to let go of Bitcoin as a tax payment when they could simply hold it and pay taxes using fiat.

But that's only if the US government legalizes Bitcoin as a tax payment tool, as that is a complex policy decision that requires legislative approval. It's unclear whether a majority of Congress and states would currently support such a policy, given the continued skepticism of many lawmakers about Bitcoin.

[OgNasty]

As for taxpayers, they are losing out on Bitcoin that could potentially appreciate in the long term, reaching a much higher value. While it's their decision whether or not to use it, I personally think it's quite a loss to let go of Bitcoin as a tax payment when they could simply hold it and pay taxes using fiat.

This is such a misguided take and it is one I see constantly.  I can't tell you how many people in this community blame me for offering silver or other products to them years ago at great prices.  Now they blame me for accepting their Bitcoin.  The very same thing they praised me for when spending it.

Let me make this perfectly clear for anyone who wrongly shares this view...

If you spend your Bitcoin, it is up to you to replace it by buying more.  If you spend your Bitcoin, it doesn't get stolen from you and it wouldn't be better to spend fiat.  All you have to do is buy more BTC to replace what you spent.  Too many people try and pass the buck of responsibility to the people who accept your Bitcoin.

People who accept Bitcoin for goods and services are the good guys, not the bad guys.  The bad guys are the ones who spend Bitcoin and never buy more to replace it.

If you pay your taxes in Bitcoin instead of fiat, you can use that fiat to replace the Bitcoin and raise your cost basis.  If you don't use that fiat to replace the spent Bitcoin you benefitted from not having to pay capital gains taxes, that is your fault and nobody else's.

[m2017]

Paying Taxes With Bitcoin Is A Win-Win-Win

If this bill passes and Bitcoin can be used to pay taxes without triggering capital gains taxes, that benefits everyone involved.

• Tax receipts would increase the Strategic Bitcoin Reserve to benefit America.
• The taxpayer can repurchase Bitcoin at current market rates, thereby raising their BTC cost basis for future tax benefit.
• The market would have BTC removed from supply forever to be placed into the SBR and will have buying pressure as that spent BTC is repurchased by the taxpayer.

A win for America.  A win for the taxpayer.  A win for the Bitcoin market.  

We should all be hoping this bill passes.  If it does, anyone with unrealized capital gains on their BTC should consider paying their taxes in Bitcoin and buying more to replace it.

Thoughts?

Win - win - win? So, three parties benefit from this? But there's one weak point in this scheme.

By the way, a bad deal is one in which both (3) parties win.

A win for America.  A win for the taxpayer.  A win for the Bitcoin market.  

Do you really think America will "worry" about the interests of the other parties to this "deal"? Of course not.

America (and this could be the government of any hypothetical country) is only interested in its own profits, while the profits of taxpayers and the crypto market are of no concern to it.

America will want to "squeeze the maximum profit out of the situation" in the form of taxes, so it's unlikely to give up such a "tasty morsel" as a capital gains tax.

Sheep are needed to shear their wool taxpayers are needed to collect taxes from them, not to create comfortable and advantageous conditions for them.

[pooya87]

If you pay your taxes in Bitcoin instead of fiat, you can use that fiat to replace the Bitcoin and raise your cost basis.  If you don't use that fiat to replace the spent Bitcoin you benefitted from not having to pay capital gains taxes, that is your fault and nobody else's.

As the Hillbillies say you are trying to go around your elbow to get to your thumb (it's the polite version )

If you have fiat then pay your taxes using fiat instead of paying it using your bitcoin then using your fiat to make a deposit into some CEX (pay transfer fees and exchange fees) to then buy bitcoin (pay an exchange fee) and then withdraw (pay a withdrawal fee) and then try to improve your privacy by going through a mixing process (pay other fees).

And if capital gains tax is such a big issue, there are still legal ways to avoid it like realizing capital loss and like half a dozen other legal tax evading tactics

[Chibit01]

He government already came out and said that they would never sell any Bitcoin they take in. They also said they were looking for budget neutral ways to accumulate more Bitcoin. I don’t know if accepting Bitcoin for tax debts falls into budget neutral territory, but I’m fairly certain they wouldn’t sell any BTC they take in.

They will not sell any bitcoin they take in, the question should be for how long? If they have Bitcoin in reserve and their have been price pushed up to a certain level which the value have double, and in a current year where their is budget deficit, will they rather prefer to print more money or sell off some of their Gold reserve when the volume of the Bitcoin held could be able to solve the problem.

The word “Never going to sell” I will rather be more comfortable if they say they won’t sell for a specific period of time and not never, and their is also a high probability of the next government to enter power not to share same vision with the current administration, things can change.

[OgNasty]

If you pay your taxes in Bitcoin instead of fiat, you can use that fiat to replace the Bitcoin and raise your cost basis.  If you don't use that fiat to replace the spent Bitcoin you benefitted from not having to pay capital gains taxes, that is your fault and nobody else's.

As the Hillbillies say you are trying to go around your elbow to get to your thumb (it's the polite version )

If you have fiat then pay your taxes using fiat instead of paying it using your bitcoin then using your fiat to make a deposit into some CEX (pay transfer fees and exchange fees) to then buy bitcoin (pay an exchange fee) and then withdraw (pay a withdrawal fee) and then try to improve your privacy by going through a mixing process (pay other fees).

And if capital gains tax is such a big issue, there are still legal ways to avoid it like realizing capital loss and like half a dozen other legal tax evading tactics

I’m talking about people that are sitting on massive capital gains that would benefit from not realizing those gains. I am not talking about paying fees to buy Bitcoin just to pay your taxes with BTC or those with capital losses.

[tread93]

I think it is a great idea to me, as it would seem to recognize Bitcoin as an official currency for the payment of (tax) debts.  If enacted, it seems that it would pave the way for the federal government to pay government contractors with Bitcoin rather than pay them in USD, further cementing Bitcoin's status as a currency rather than an investment vehicle.  Perhaps this would open the door to treating it more like cash for tax purposes??

We can only hope that it will open the door up to treat bitcoin as cash for tax purposes. Apparently taxes for a houshold who makes under 100k are to be eliminated I am seeing. I wonder if that will get passes or not. The problem is that it takes more than 100k to live in comfort in the USA and so now there are a lot of peoplel who will do there best to make just under 100k so that they don't have to pay taxes. I guess if you make over the 100k you would just pay taxes on the portion over that? And in that case by then we could have those taxes paid in Bitcoin 

[LFC_Bitcoin]

I’d have to have a much deeper think about this but Bitcoin has basically retired me. I live off Bitcoin, I sell when I need money to live. When I sell Bitcoin I trigger a Capital Gains Tax disposal which I then declare and pay up to 12 months later. I usually sell what I need to live for four years every bull run.

If I was to pay taxes in Bitcoin I’d probably be losing precious Bitcoin in a bear market when it is worth less in fiat terms so I would be losing more sats at a lower fiat price. For me, this doesn’t work. I would rather pay my taxes in £ rather than lose more Bitcoin when I submit my tax returns.

[BlackBoss_]

I’d have to have a much deeper think about this but Bitcoin has basically retired me. I live off Bitcoin, I sell when I need money to live. When I sell Bitcoin I trigger a Capital Gains Tax disposal which I then declare and pay up to 12 months later. I usually sell what I need to live for four years every bull run.

It's your very diligent plan by preparing money to use every four years and by taking profit partially with your bitcoin in every bull run, I think you will also have plan to use part of that money for buying bitcoin in a bear market. Your plan is good for your money fund to use during a bear market and also creates good chance of bitcoin accumulation back in a bear market.

If I was to pay taxes in Bitcoin I’d probably be losing precious Bitcoin in a bear market when it is worth less in fiat terms so I would be losing more sats at a lower fiat price. For me, this doesn’t work. I would rather pay my taxes in £ rather than lose more Bitcoin when I submit my tax returns.

I agree with you. Because using bitcoins in a bear market with lower price than in a bull market is a loss, and if you have a good plan, have cash in your hands, you can pay capital gain tax in bitcoins. It's better prepared and more wisely plan for capital gain tax payment to the government.

[pawanjain]

It looks more like Win-Lose-Lose to me.

The US government will win since they'll freely acquire bitcoins without any effort. And that will also help them increase their surveillance on all Americans who own any coins which the IRS will use in the future to extort more money from them.

Agreed

It is a lose for the taxpayer because many people still see bitcoin as an investment and they don't want to spend their coins let alone hand it over to the government. That's the stash they've worked so hard to accumulate.
Additionally the lose of privacy is going to hurt them in the future.

Although I agree to the lose of privacy part but if I am taking this correctly then I think its not a loss for the taxpayer.
Yes he will have to handover his existing coins to the government but at the same time he can go ahead and buy bitcoins at the current market price right.
So on one side he would be spending his coins and on the other side he would be buying the same amount of coins both at the same price.
Doing this he would be saving on the capital gains on his existing coins right and then he can repeat the same next year by using his existing coins which he purchased previously.
Due to the rise in bitcoin price he would then save some amount of money and if he keeps on doing this he would be saving a lot on the capital gains. What do you think ?

It is a lose for the bitcoin market since the US government having bitcoin will translate into them wanting to control that market and even pull off market manipulation to cover part of their budget deficit which would damage bitcoin image and the bitcoin market.

Agreed

[OgNasty]

It is a lose for the bitcoin market since the US government having bitcoin will translate into them wanting to control that market and even pull off market manipulation to cover part of their budget deficit which would damage bitcoin image and the bitcoin market.

Agreed

I think the benefits of having a smaller supply outweigh the paranoia of worrying about who owns those BTC.  At least from a market price perspective, clearly having the US Government permanently removing BTC from circulation would be a positive.

[NotATether]

I really like this bill!

I just calculated my capital gains taxes for 2025 (which I guess includes BTC swaps to other cryptocurrencies?), and suffice it to say, I'm not really looking forward to going to Kraken to sell coins. Why give the exchange a cut?  

The question is, will this bill even pass. Because a lot of dinosaurs in Congress still hate crypto even in 2025.

[noorman0]

I think the benefits of having a smaller supply outweigh the paranoia of worrying about who owns those BTC.  At least from a market price perspective, clearly having the US Government permanently removing BTC from circulation would be a positive.

In my perspective it adds to the paranoia that if rumors like this start to surface, 1, 2, 3. I'll return to the question: What will happen when budget deficits, mounting debt, or a consensus vote forces bitcoin reserves to be cashed in?
No. They don't actually remove it from circulation.

[Emjay24]

I think it is a great idea to me, as it would seem to recognize Bitcoin as an official currency for the payment of (tax) debts.  If enacted, it seems that it would pave the way for the federal government to pay government contractors with Bitcoin rather than pay them in USD, further cementing Bitcoin's status as a currency rather than an investment vehicle.  Perhaps this would open the door to treating it more like cash for tax purposes??

The idea is not to spend the bitcoin gathered from the citizens taxes but to accumulate it as BSR and not sell it out, I honestly doubt people would prefer to pay in BTC, most especially for privacy reasons, someone practicing self-custody and privacy uses bitcoin to pay taxes from their wallet, then the wallet is linked to his physical identity.

It would only make more sense for people receiving their funds from their employers already in BTC of which their real identity is known by the company, maybe they would prefer to pay with BTC rather than converting to FIAT and paying the taxes. I still believe most people would pay in Fiat.

With a debt of $37.64 T, I doubt that they would be able to resist selling parts of the bitcoin in the BSR if more people adapt the bitcoin tax payment option since it would reduce further available funds for their continuous spending. It might even lead them to printing yet more dollar to augment what is left.

[henry_of_skalitz]

I really like this bill!

I just calculated my capital gains taxes for 2025 (which I guess includes BTC swaps to other cryptocurrencies?), and suffice it to say, I'm not really looking forward to going to Kraken to sell coins. Why give the exchange a cut?  

The question is, will this bill even pass. Because a lot of dinosaurs in Congress still hate crypto even in 2025.

As the real ones,  they will be gone eventually.

Or they will truly start to see more pros than cons even for themselves

[pawanjain]

It is a lose for the bitcoin market since the US government having bitcoin will translate into them wanting to control that market and even pull off market manipulation to cover part of their budget deficit which would damage bitcoin image and the bitcoin market.

Agreed

I think the benefits of having a smaller supply outweigh the paranoia of worrying about who owns those BTC.  At least from a market price perspective, clearly having the US Government permanently removing BTC from circulation would be a positive.

It might not be a concerning factor as of yet since only a minor portion of the bitcoin supply is with the US government.
But if their reserves keeps on increasing without them selling any of it then it surely will be concerning at some point of time.
We cannot really have the maximum supply of any asset held with just one entity.