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You would pay both - sales tax is collected by the seller. The gain on the Bitcoin is the value of the transaction, less your basis for the Bitcoin involved. Th
by wrycoder 6y ago
You would pay both - sales tax is collected by the seller. The gain on the Bitcoin is the value of the transaction, less your basis for the Bitcoin involved. That gain can be long term or short term and is taxed accordingly.
- nerdponx 6y agoSo how does this work outside of cryptocurrency? Suppose I change a bunch of USD for EUR at an airport. Six months later, the Euro has appreciated significantly vs the US Dollar. I go on another trip, and buy some stuff with the Euros I changed several months ago. Do I technically owe capital gains tax?
- wrycoder 6y agoNot if you paid for the stuff in Euros. But if you changed the appreciated Euros back into dollars, you’d at least theoretically owe tax on a foreign exchange gain. For pocket money, no one is going to bother with it. But I’ve been in situations involving hundreds of thousands of dollars held for long periods in foreign currencies, where the tax consequences were real. There’s a line on the 1040 to account for foreign exchange gain/loss.