The Internal Revenue Service (IRS), ruled on Tuesday, that bitcoin and other virtual currencies will be taxed as property.
According to the IRS ruling, bitcoin and other virtual currencies will be treated in the same way that stocks are. This means that those using virtual currencies will have to keep strict records of their transactions and taxes while using those currencies. However, the new ruling also means that virtual currency users treating it as an investment will have to apply the same rules to it as a capital gain. This mean that virtual currencies could be given a lower tax rate, reports The Wall Street Journal.
The ruling also declares that if virtual currencies are used in a retail situation then it will be taxable. This means that bitcoin users will have to keep track of when they use the virtual currency and pay taxes on it later, WSJ notes.
“The people that feel ideologically that Bitcoin should be free of all regulation aren’t going to be happy,” Gil Luria, a managing director at Wedbush Securities, told The New York Times. “If you’re trying to replace an existing financial system, then you need to have all the features that are required of that financial system.”