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Let me get this straight.. I open a Coinbase account. I feed it $50 for some bitcoin, and use a small amount to pay for a web hosting package somewhere. I the

• deleted 6y ago
  [deleted]
• greenyoda 6y ago
  You need to pay tax on any capital gain you incurred when you converted the bitcoin to dollars to pay for that web hosting package. For example: On 1/1/2020 you bought $50 worth of bitcoin. On 6/1/2020, you converted your bitcoin to dollars to pay for hosting. By that point, let's say, the price of bitcoin had doubled, so you sold half of your bitcoin to pay your $50 hosting fee, thus getting $50 for bitcoin that you bought for $25. Your taxable capital gain would be $25 ($50 - $25). (I'm assuming that even if the hosting provider accepts bitcoin as payment, the price of their services is denominated in dollars.) The bitcoin that's left in the account (now valued at $50) is not subject to any taxes until the year when you sell or exchange it. In general, on your 2020 tax return, you'll be reporting income (including capital gains) that you received in the 2020 calendar year. For more information: https://www.irs.gov/individuals/international-taxpayers/frequently-asked-questions-on-virtual-currency-transactions https://www.irs.gov/individuals/international-taxpayers/freq...