Taxation Basics
The IRS treats Bitcoin as property, not currency. This means every time you sell, trade, or spend Bitcoin, it is a taxable event — even if you are just buying coffee. The good news: holding Bitcoin is not taxable. The tax only triggers when you dispose of it.
Taxes vary by country, but many treat Bitcoin as property for tax purposes. Selling, trading, or spending can trigger taxable events.
Simple definitions:
- •Capital gain/loss: Profit or loss when you dispose of an asset.
- •Cost basis: What you paid (including fees).
- •Holding period: Time you held the asset (short‑ vs long‑term).
- •Taxable event: An action that creates a tax obligation (e.g., selling BTC).
Keep records of every purchase (date, amount, price paid). Software like CoinTracker or Koinly can automate this. Long-term gains (held over 1 year) are taxed at lower rates than short-term gains.
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