Tax bitcoin as a whole or only capital gains once sold?

[becapital]

Hi everybody i really hope someone could help me out with this situation. I know that i have to pay taxes once i cashout my bitcoin (shame i have to do so, I'd rather buy stuff with bitcoin) but do they tax just the capital gain or the whole price of bitcoin? Ex. I bought 1 BTC priced at $400 then i sell said BTC at $450, Do i pay tax on the whole $450 or just the $50 profit i earned?

Also what about mining? like if i mined 1 BTC that was worth $450 the day i mined it, and and then sell it at $490 do i pay the whole $490 as income tax and then another tax for the $40 profit as capital gain?

Someone please help me out as i am confused with all this nonsense.

[botany]

Hi everybody i really hope someone could help me out with this situation. I know that i have to pay taxes once i cashout my bitcoin (shame i have to do so, I'd rather buy stuff with bitcoin) but do they tax just the capital gain or the whole price of bitcoin? Ex. I bought 1 BTC priced at $400 then i sell said BTC at $450, Do i pay tax on the whole $450 or just the $50 profit i earned?

Also what about mining? like if i mined 1 BTC that was worth $450 the day i mined it, and and then sell it at $490 do i pay the whole $490 as income tax and then another tax for the $40 profit as capital gain?

Someone please help me out as i am confused with all this nonsense.

For trading, it should be straight forward. You would have to pay capital gains only on your profit. That might be taxed at some concessional rate or may even be exempt from taxes, depending on your jurisdiction.

Mining is different. In your example above, I don't think you should be paying tax on $490 of income and $40 for capital gains, because it is double taxation. Common sense tells me that you should pay income tax on $490, but that would again depend on which country you are in.

[becapital]

Hi everybody i really hope someone could help me out with this situation. I know that i have to pay taxes once i cashout my bitcoin (shame i have to do so, I'd rather buy stuff with bitcoin) but do they tax just the capital gain or the whole price of bitcoin? Ex. I bought 1 BTC priced at $400 then i sell said BTC at $450, Do i pay tax on the whole $450 or just the $50 profit i earned?

Also what about mining? like if i mined 1 BTC that was worth $450 the day i mined it, and and then sell it at $490 do i pay the whole $490 as income tax and then another tax for the $40 profit as capital gain?

Someone please help me out as i am confused with all this nonsense.

For trading, it should be straight forward. You would have to pay capital gains only on your profit. That might be taxed at some concessional rate or may even be exempt from taxes, depending on your jurisdiction.

Mining is different. In your example above, I don't think you should be paying tax on $490 of income and $40 for capital gains, because it is double taxation. Common sense tells me that you should pay income tax on $490, but that would again depend on which country you are in.

okay i understand, now another question say i mined 1 bitcoin worth $450 and then a month later i sold it for $400 now would i need to pay income tax on the $450 price or $400 price?

[botany]

Hi everybody i really hope someone could help me out with this situation. I know that i have to pay taxes once i cashout my bitcoin (shame i have to do so, I'd rather buy stuff with bitcoin) but do they tax just the capital gain or the whole price of bitcoin? Ex. I bought 1 BTC priced at $400 then i sell said BTC at $450, Do i pay tax on the whole $450 or just the $50 profit i earned?

Also what about mining? like if i mined 1 BTC that was worth $450 the day i mined it, and and then sell it at $490 do i pay the whole $490 as income tax and then another tax for the $40 profit as capital gain?

Someone please help me out as i am confused with all this nonsense.

For trading, it should be straight forward. You would have to pay capital gains only on your profit. That might be taxed at some concessional rate or may even be exempt from taxes, depending on your jurisdiction.

Mining is different. In your example above, I don't think you should be paying tax on $490 of income and $40 for capital gains, because it is double taxation. Common sense tells me that you should pay income tax on $490, but that would again depend on which country you are in.

okay i understand, now another question say i mined 1 bitcoin worth $450 and then a month later i sold it for $400 now would i need to pay income tax on the $450 price or $400 price?

Think of bitcoin as any other product. For example, when you have a gold/oil producer, revenue is recognized only when the commodity is sold. Applying that logic, income tax would be applicable only on $400 price.

However, different jurisdictions might have other levies (like value added tax) which could be levied when you mine bitcoins.

Experienced members, please correct me if I am wrong.

[pawel7777]

For trading, it should be straight forward. You would have to pay capital gains only on your profit. That might be taxed at some concessional rate or may even be exempt from taxes, depending on your jurisdiction.

That's correct. But note that you must be able to provide evidence that you bought BTC at certain price etc, otherwise they can expect you to pay tax based on total value.
In case of any doubts, don't be afraid to ask relevant tax office, as there may still be some uncertainties in interpretation of tax rules.

[becapital]

For trading, it should be straight forward. You would have to pay capital gains only on your profit. That might be taxed at some concessional rate or may even be exempt from taxes, depending on your jurisdiction.

That's correct. But note that you must be able to provide evidence that you bought BTC at certain price etc, otherwise they can expect you to pay tax based on total value.
In case of any doubts, don't be afraid to ask relevant tax office, as there may still be some uncertainties in interpretation of tax rules.

okay that part i got but what about all the other stuff botany said? is he correct?

[pawel7777]

For trading, it should be straight forward. You would have to pay capital gains only on your profit. That might be taxed at some concessional rate or may even be exempt from taxes, depending on your jurisdiction.

That's correct. But note that you must be able to provide evidence that you bought BTC at certain price etc, otherwise they can expect you to pay tax based on total value.
In case of any doubts, don't be afraid to ask relevant tax office, as there may still be some uncertainties in interpretation of tax rules.

okay that part i got but what about all the other stuff botany said? is he correct?

What he said makes sense, but I'm not an expert. If you want to get the proper advise, you should start with providing more details (where are you from? How many BTC have you mined, do you mine as continuous/commercial activity or was it just one-time only etc). Hopefully someone better informed will help you a bit more.

But again, if you're talking about significant amounts, seek for professional advice (or ask your tax authorities directly), never rely entirely on advise from forum.

Mining is different. In your example above, I don't think you should be paying tax on $490 of income and $40 for capital gains, because it is double taxation. Common sense tells me that you should pay income tax on $490, but that would again depend on which country you are in.

Agree, you pay either CG or Income Tax, not both. Although, if you mined 1 BTC and sold for $490, you should pay income/CG tax on that amount LESS electricity/mining hardware depreciation costs.

I've no idea whether you are liable for tax if you mined BTC and didn't sell them, if it's a significant amount, I'm guessing you'd be expected to declare them at current value.

[dwolfman]

Yes, it is very important to say where you are, because no two countries/states have the same tax laws 100%.  There's always something different between them. 

For example, in the USA on the federal tax return you would have to report the mined bitcoin as of the day you received it as income.  So if it was $450 when you received it, you report $450 income and pay regular income tax on that amount.  Then if you sell it at $490, since you already paid taxes on the $450 you don't pay taxes on that part but pay cap gains taxes on the profit of $40.

[becapital]

Yes, it is very important to say where you are, because no two countries/states have the same tax laws 100%.  There's always something different between them. 

For example, in the USA on the federal tax return you would have to report the mined bitcoin as of the day you received it as income.  So if it was $450 when you received it, you report $450 income and pay regular income tax on that amount.  Then if you sell it at $490, since you already paid taxes on the $450 you don't pay taxes on that part but pay cap gains taxes on the profit of $40.

I shouldve said where i live earlier but it is in the USA, so then i would have to pay double tax on my bitcoins and i continously mine daily with a pool, but what about if i mined a bitcoin worth $500 one day and then sell it at $450 another day would i have to pay income taxes on the $500 or $450?

P.S. I am trying to look for a tax advisor who knows everything about the bitcoin tax but to no avail.

[prolixus]

Yes, it is very important to say where you are, because no two countries/states have the same tax laws 100%.  There's always something different between them. 

For example, in the USA on the federal tax return you would have to report the mined bitcoin as of the day you received it as income.  So if it was $450 when you received it, you report $450 income and pay regular income tax on that amount.  Then if you sell it at $490, since you already paid taxes on the $450 you don't pay taxes on that part but pay cap gains taxes on the profit of $40.

I shouldve said where i live earlier but it is in the USA, so then i would have to pay double tax on my bitcoins and i continously mine daily with a pool, but what about if i mined a bitcoin worth $500 one day and then sell it at $450 another day would i have to pay income taxes on the $500 or $450?

P.S. I am trying to look for a tax advisor who knows everything about the bitcoin tax but to no avail.

In that scenario you have $500 of ordinary income you pay taxes on, and a $50 short term capital loss. You can deduct up to $3,000 per year of losses from your other income. So effectively you would only have to pay taxes on the $450 that you realized.

[cryptoanarchist]

Can someone please point me to the LAW that says cryptocoins transactions are taxable in the first place?

NOT IRS code. The IRS is simply a foreign trust based in puerto rico. They have no law making powers.

[prolixus]

Can someone please point me to the LAW that says cryptocoins transactions are taxable in the first place?

NOT IRS code. The IRS is simply a foreign trust based in puerto rico. They have no law making powers.

Certainly: http://www.law.cornell.edu/uscode/text/26/1001

(a) Computation of gain or loss
The gain from the sale or other disposition of property shall be the excess of the amount realized therefrom over the adjusted basis provided in section 1011 for determining gain, and the loss shall be the excess of the adjusted basis provided in such section for determining loss over the amount realized.
(b) Amount realized
The amount realized from the sale or other disposition of property shall be the sum of any money received plus the fair market value of the property (other than money) received.

[cryptoanarchist]

Can someone please point me to the LAW that says cryptocoins transactions are taxable in the first place?

NOT IRS code. The IRS is simply a foreign trust based in puerto rico. They have no law making powers.

Certainly: http://www.law.cornell.edu/uscode/text/26/1001

(a) Computation of gain or loss
The gain from the sale or other disposition of property shall be the excess of the amount realized therefrom over the adjusted basis provided in section 1011 for determining gain, and the loss shall be the excess of the adjusted basis provided in such section for determining loss over the amount realized.
(b) Amount realized
The amount realized from the sale or other disposition of property shall be the sum of any money received plus the fair market value of the property (other than money) received.

None of that has anything to do with cryptocoins.

[charliemaggot]

Hi everybody i really hope someone could help me out with this situation. I know that i have to pay taxes once i cashout my bitcoin (shame i have to do so, I'd rather buy stuff with bitcoin) but do they tax just the capital gain or the whole price of bitcoin? Ex. I bought 1 BTC priced at $400 then i sell said BTC at $450, Do i pay tax on the whole $450 or just the $50 profit i earned?

Also what about mining? like if i mined 1 BTC that was worth $450 the day i mined it, and and then sell it at $490 do i pay the whole $490 as income tax and then another tax for the $40 profit as capital gain?

Someone please help me out as i am confused with all this nonsense.

Mining. This is plain income and the value of the Bitcoins on that day. So if you mined 1 BTC when it was worth $450 (or whatever daily price chart you use) income. That is just added to your normal income totals and so taxed at your ordinary rate.

If you are a business, or file as self-employed, you can deduct expenses related to your mining activities for that year.

Capital Gains. Whenever you sell or spend a Bitcoin, you need to calculate the difference between what you sold/spent it for and how much you bought it for. That difference is your gain or loss and is taxable as capital gains. If you owned the coins for more than a year, it would be long-term gains, and has a reduced tax rate of 0% or 15% depending on your other income. However, if you've only owned it for a year or less, then the gain is treated as normal income and taxed at your standard income rate.

So if you mined a coin and sold it, e.g. mined 1 BTC when $450, and sold it for $490. First, you'll delcare the $450 as income and pay taxes on that (e.g. 25% or your rate). Then the $40 is capital gains and you'll pay taxes on that. Again, the rate depends on how long you've owned the coin and what other income you have.

Have a look at https://bitcointaxes.info for more information and to work out capital gain taxes.

[itsAj]

Hi everybody i really hope someone could help me out with this situation. I know that i have to pay taxes once i cashout my bitcoin (shame i have to do so, I'd rather buy stuff with bitcoin) but do they tax just the capital gain or the whole price of bitcoin? Ex. I bought 1 BTC priced at $400 then i sell said BTC at $450, Do i pay tax on the whole $450 or just the $50 profit i earned?

Also what about mining? like if i mined 1 BTC that was worth $450 the day i mined it, and and then sell it at $490 do i pay the whole $490 as income tax and then another tax for the $40 profit as capital gain?

Someone please help me out as i am confused with all this nonsense.

You only pay capital gains on the $40 profit as a capital gain (in your specific example case). This applies regardless if you exchanged your bitcoin for fiat or if you exchanged your bitcoin for $450 worth of goods/services (your selling price would be the fair market value of the goods/services that your purchased).

[becapital]

Okay i finally understand (now lets just hope i get it right during tax time) thank you all for all your help and time, i appreciate that you took the time to explain everything to me. I hope you all have a good day