Better late than never: IRS hands down virtual currency tax guidance, clears way for further innovation
Twenty days: that’s how long American virtual currency users have to comply with newly released tax guidelines if they want to meet the April 15 filing deadline. The IRS today released an official statement declaring that virtual currencies – including, but not limited to bitcoin – will be treated as property.
In short, this means that bitcoin will be treated the same way shares of stock, real estate assets, and other investments and will be subject to capital gains taxes.
The IRS also released a series of answers to 16 frequently asked questions. The list includes how fair market value will be established, whether past filers will be subject to penalties for non-compliance, and the treatment of virtual currency mining.
If anything, the bitcoin market should view the decision positively simply for the clarity that it brings to what was previously an ambiguous situation. With the rules of the road clear, individual and institutional investors as well as entrepreneurs can proceed knowing how their actions will be treated at year end.