Are bitcoins taxable?

**Douchebag** · February 03, 2022, 06:30 PM

Soooooo I purchased around $36 worth of bitcoins last year. Is this taxable? Cuz I just got an email from coinbase saying I had taxable activity in 2021 and I have to report this to the irs. All I did is donate 12 bucks for a psychic reading and I may have transferred a few dollars back to my wells Fargo bank account. That's it.

Also, I dont have a job

Thanks a bunch!

EDIT: I also received $5 worth of bitcoins(from coinbase) as a reward for doing something.

**Douchebag** · February 03, 2022, 09:19 PM

I just read the faq page from coinbase, and it said any rewards you receive is considered a miscellaneous income. Which means I have to report this to the IRS...but my dad is saying i dont have to Cuz it's only $5. I dont know who to trust here

**Akar** · February 04, 2022, 01:18 PM

The IRS classifies virtual currency such as Bitcoin as property and thus requires capital gains taxes to be made on it only at the time that those profits are realized. If you don't sell the property, you do not have to pay the tax. If you do sell the property, you are required to pay the appropriate capital gains tax rate.

All I did is donate 12 bucks for a psychic reading and I may have transferred a few dollars back to my wells Fargo bank account.

In this situation, assuming you sold the bitcoin(s) for more than you paid for them, you will have realized capital gains. If you sold them for less than what you paid for them, you can actually write off the loss on your taxes (up to a maximum of like $1500 or so I think).

Also, I dont have a job

According to the IRS, the capital gains tax rate for those earning $40,000 or less is 0%.

So in this case you do technically need to report that income, no matter how small, to the IRS so that they can tax it at the appropriate rate - in your case 0%.

I dont know who to trust here

Your father is technically wrong, but he's also right in the sense that the chance of the IRS coming after you over not reporting capital gains earnings that you wouldn't even be required to pay taxes on is vanishingly small. Coinbase is correct that taxable activity has occurred and while you are legally required to report it (see the PDF I linked above to learn how) you are also in an income bracket that precludes you from paying capital gains taxes.

I personally wouldn't report it, but that's just me.

**Douchebag** · February 04, 2022, 02:17 PM

Wow, thanks a lot akar!!!! Ya, I'm not gonna report it lol
+ rep :p

**Akar** · February 04, 2022, 02:49 PM

No problem, glad I could help

.

**~~swabian~~** · April 09, 2022, 08:17 AM

To what Akar said is to add, that it very much depends on your country.

In some countries, income from capital investments (which buying and holding crypto is without exception) are not linked to taxation of wage based income. For example, in Germany you pay 25% on every net gain made from capital investments, regardless of your income from your job. It's a completely different pot, so to speak. In other countries, capital based income may be considered the same as income from wages or there may be some more complex ruling in place that represents a combination of the two basic principles.
You'd need to look that up. If you don't understand what the law in your country is saying, you can link an English version here and we have a look.

There is also most likely a tax exempt amount equivalent to a few hundred dollars annually. In Germany it's 600€ per year. Every capital gain above that is taxable.