Bitcoin is now trading at a price of over $7,000, great news for those who trusted the cryptocurrency’s run, but users still need to pay attention on what you can do with it.
The everyday items you can buy with the digital currency have multiplied over the years, with Overstock.com being an example of business that accepts Bitcoin as payment. Therefore, you can buy all your furniture using digital currency, informs TIME.
Several big companies now accept payments!
CheapAir, Microsoft, Dell or Newegg are other big names that have seen the possibility that stands behind Bitcoin and now allow payments with cryptocurrency. In Allentown, Pennsylvania, you can even buy a Subway sandwich using Bitcoin or gain access to the VIP room of a “gentlemen’s club” in Las Vegas.
However, things are more complicated that seem at a first glance, warns Bryan Skarlatos, a lawyer who specializes in tax issues at Kostelanetz & Fink. “All those transactions go into your tax return,” said Skarlatos, adding that the Internal Revenue Service does not view bitcoins as a currency like the dollars in your wallet, but go more in the “property” department. This means that they’re subject to capital gains taxes.
Is the entire payment process a bit tricky?
To be more exact, this translates into the fact that you’re essentially making two transactions. First of all, you are selling property, represented by Bitcoin, and afterwards are using the proceeds of that sale to make a purchase. If the digital currency sees a growth in value, then you’re subject to capital gains tax when purchasing an item.
To make things right, you are supposed to list every purchase you made in any given year with Bitcoin, no matter how big is the capital gain or loss.
Only 802 people reported Bitcoin profits to the IRS in 2015, although transactions are stored permanently within bitcoin’s network.