Bitcoin and Taxes

Tax treatment of Bitcoin varies significantly by country, and this is not financial or legal advice. For specific questions, a qualified tax professional who understands cryptocurrency is the right call.

With that said — here’s the general landscape that most people find useful to understand before they get started.

In most countries, Bitcoin is treated as a capital asset — similar to shares or property. This means that when you sell, exchange, or spend Bitcoin, a taxable event may occur if the value has changed since you acquired it. If you bought Bitcoin at $30,000 and sold at $40,000, the $10,000 gain may be taxable. If you sold at $25,000, you may have a reportable loss.

Simply holding Bitcoin is generally not a taxable event in most jurisdictions. Buying and holding is different from selling.

Some countries are friendlier than others. Germany, for instance, has historically exempted Bitcoin gains from tax if held for more than a year. Portugal had a similar arrangement for some time. Rules change regularly — worth checking current local regulations.

The most important habit from a tax perspective: keep records. Every purchase, every sale, every exchange. Date, amount, price at the time. Most exchanges provide transaction history exports. Dedicated crypto tax software exists to help organise this.

The people who get into trouble with Bitcoin and taxes are generally those who didn’t keep records and then tried to reconstruct years of history retroactively.

Tomorrow: a story — one person’s first year with Bitcoin.

If you want to share this journey with someone in your family — a partner, parent, or friend who keeps asking what Bitcoin is — this book was written for exactly that conversation:

The Bitcoin Family Guide — amzn.to/3Na8fve

— The Daily Bit