A few weeks ago when Bitcoin dipped below $200, I saw someone write on Reddit something along the lines of, “Hey, at least the majority of us don’t have to worry about reporting anything about Bitcoin on our tax returns, now!” Several people agreed. What they may not have realized, however, was that the IRS lets you write-off up to $3000 in what are called “capital losses” in any given tax year.
When the IRS officially issued guidance on Bitcoin in 2014, they said that it would be recognized as “property” – this meant that the value at which it was bought/acquired, must be tracked, along with the value at which it is sold, and be subject to a “capital gains” tax rate if sold for a profit (which can be a rate of 15% or more, depending on your tax bracket). This can be a huge hit on someone’s bottom line, especially if you didn’t come out more than 15% ahead.
While we all want to maximize our profits, thankfully due to the IRS’s “capital losses” credit of up to $3000, you might actually come out better on your tax return by taking advantage of it. This is because anytime you bought/acquired Bitcoin in 2014 and sold it for less than the price you initially recognized it at, that’s called a “capital loss.” You can add those up over and over again until they add up to $3000 – which the IRS will let you write-off to offset your overall income on your tax return.
With LibraTax, you can easily import your Bitcoin transactions from 2014 in minutes. We’ll calculate your total loss, and even automatically prepare the IRS form that you can give to your CPA to take advantage of this on your tax return.
Sign up for LibraTax for free and see where your Bitcoin gains and losses stacked up at the end of this last year. We offer several different reporting options that are compliant with IRS guidelines – this will ensure that you are compliantly minimizing your reportable gains and maximizing your reportable losses. You can do it anonymously and it just takes a few minutes to get started.