I am wondering the Tax implications of spending bitcoin. I know that if I buy bitcoin, and sell it, then I have realized capital gains that are subject to taxes.
When I spend bitcoin on an item or service is it the same thing? It seems the standard for spending bitcoin currently is there is a US dollar amount and the BTC price is computed from that at the current trading price (or some proxy of it). I was thinking perhaps that is also an event where you realize capital gains.
It's weird because it's not something you would think about if you say, exchanged USD for Euros, then the value of the Euro went up, and you bought a product with Euros. It doesn't seem that would be an event where you'd be realizing capital gains. Although, it's possible there is an explicit exception for certain currencies.
I read somewhere that technically any asset is subject to what I'm describing with BTC. Especially when simply buying and selling an item. For example, I believe on things like homes, classic cars, art, etc, if you realize a capital gain after a sale, then you owe taxes. Apparently this isn't necessarily common knowledge as most assets don't appreciate in value anyway.
Although it made me think to take this thinking in the other direction, if I can realize capital gains by selling an asset that increases in value, can I claim losses when I sell an asset that has decreased in value. For example, if you buy a car, and sell it in 5 years, it would have lost value. Shouldn't that loss be claimable, just as it would be if I sold a stock?
How about if I traded my car for another asset or service, barter style? Similar to spending bitcoin! Does that technically have tax implications?
Just was going through the mental exercise, and wanted to see if others had insights, thoughts, rants about cryptocurrency that they'd like to share.
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