Read time: 

Bitcoin and Taxes: What You Should Report

Bitcoin is growing very rapidly as a digital currency and as an investment opportunity. But they do not tax on the Bitcoin transactions by most of the people, and still many people do not know that Bitcoin transactions are taxable. In this guide, we will walk you through what you are to report to the tax authorities regarding your Bitcoin activities.

Understanding Bitcoin Taxation

Like in most other jurisdictions including US, Bitcoin is not treated as currency but as property for tax purpose with tax on capital gains apply for every sale of your Bitcoin with profit. That means any revenue or losses from Bitcoin transactions will be subject to capital gains tax.

Reporting Bitcoin Transactions

Here are the main types of Bitcoin transactions you need to report:

1. Buying Bitcoin

If you acquired your Bitcoin directly from Fiat=(US EURO ), you will not need to align a transaction with fiat currency such as US dollars or euros to pay tax. However, you should nevertheless maintain a record associated with the purchase for future reference.

2. Selling Bitcoin

In the event that you sell Bitcoin for cash or other assets, you will need to report any capital gains or losses from the sale. If you held the Bitcoin for over a year then you will have long-term capital gains, else short term capital gains.

3. Exchanging Bitcoin for Goods or Services

This means that if you buy something with your Bitcoin you have to declare any increase or decrease in value when you come to filing your taxes. It must be valued on the fair market value of the goods/services at the time of the transaction.

4. Receiving Bitcoin as Income

If you are compensated for services or receive Bitcoin as payment for goods, you must include the fair market value of bitcoins on the date of receipt (in U.S. dollars) when calculating how much you have to report for income taxes. Whether you receive Bitcoin as a part of your salary, payment for freelance work or mining.

5. Mining Bitcoin

Therefore, if you are mining Bitcoin, you are expected to claim the fair market value of the Bitcoin received as income on tax forms. You may be able to write off expenses incurred in connection to your mining (think electricity costs or hardware purchases).

Keeping Records

Maintaining adequate records of all your Bitcoin activities in order to properly declare your transactions for tax purposes. This tax can be easily implemented by cross-referencing Bitcoin purchases, sales, exchanges and revenue from Bitcoin associated activities with each other including the relevant documents. It is also helpful to record the fair value of bitcoins at the time of the transaction.

Reporting Requirements

US-based individuals have special reporting responsibilities for Bitcoin transactions in the states they live in, but other jurisdictions have their own rules as well. Always consult with a tax professional who can give you information and help you comply with the tax laws in your country.


It is important to understand your tax responsibilities, how Bitcoin is taxed, and how much tax you should be paying from each income generated. Being truthful in your Bitcoin actions and having an entire file of your actions will be certain that you're tax compliant and keep away from any fines of penalties. Always confer a professional tax adviser to ensure you are reporting your Bitcoin transactions correctly.

Share This Article


Subscribe To Our Newsletter