18.1 C

Using Bitcoin to buy Tesla. Get ready to listen to the IRS

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If you got rich buying Bitcoin a year ago, Elon Musk invites you to buy one of his cars with some money. Tax collection will follow if you look.

This is because for the brilliant new Tesla, digital asset cashing will be seen as a return on equity. Say you bought cryptocurrencies a year ago when Bitcoin was selling for about $ 6,500. Spending about $ 38,000 to buy the new Tesla Model 3 would mean a cash gain of $ 31,500, which is the cheaper end of the electric car spectrum. At the current rate of capital gains, this is $ 4,750, or the tax bill you will have to make, or almost as much as the amount you paid for your initial Bitcoin.

This applies to any transaction that turns Bitcoin into a physical asset. The IRS, which has begun asking crypto users to disclose transactions on their personal tax returns, asks taxpayers if they “received, sold, sent, exchanged or otherwise acquired any financial interest in any digital currency.” »:

The opposite is also true. If you were to buy that token when it reached $ 61,000 earlier this month, you would not want to keep it, converting some of it into a Model 3 next year would give you a neat tax boost.

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