Elon Musk at a 2015 event to launch the new Tesla Model X Crossover SUV in Fremont, California.
Justin Sullivan | Getty Images News | Getty Images
You may be aware that you can now buy a Tesla using bitcoin.
Elon Musk, CEO of Tesla, announced Tuesday afternoon that it is now possible to buy Tesla vehicles in the U.S. with bitcoin.
“Now you can buy a Tesla with Bitcoin,” Musk tweeted.
If you’re interested in the idea, here’s a twist: the prosecutor will go gliding with his palms out.
When you use Bitcoin to buy goods or services, you are actually selling that cryptocurrency. And, for tax purposes, the IRS treats Bitcoin and its siblings as a property whose sale entails a gain or loss depending on whether it is worth more or less than when you acquired it.
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“It’s really important to know the cost base of any cryptocurrency (the value when you bought it) and when it’s achieved,” said Garrett Watson, a senior policy analyst at the Tax Foundation. “This will determine how much you are subject to taxes and what type of taxes you are paying.”
Right now, a bitcoin is worth about $ 56,000, up from $ 6,700 the year before. Last month, Tesla announced it had bought $ 1.5 billion worth of bitcoin and would soon begin accepting bitcoin as a form of payment for its electric vehicles, which come with starting prices of about $ 38,000 for a Model 3 a about $ 80,000 for an X model, according to Edmunds.com.
If you use bitcoin that you have held for a year or less, any increase between its value when you bought it and when you use it to make a purchase is considered a short-term gain and would be taxed on ordinary income tax, which they range from 10% to 37%, depending on your total income.
Keep in mind that depending on your other income and the amount of the short-term gain, you could move on to a higher tax bracket. For example, if you have a $ 40,000 taxable income without the bitcoin transaction, the highest rate you will pay would be 12%. If you were to add a $ 10,000 bitcoin profit to this, it would push you to the next tax bracket, which includes a marginal rate of 22% for earnings in excess of $ 40,525.
On the other hand, if you had kept bitcoin for more than a year when you made the purchase, you would be taxed at long-term capital gains rates, which are either 0%, 15% or 20%. , depending on which tax bracket your income is in.
One way to reduce capital gains taxation is to use other investment losses.
“If you have capital losses elsewhere, it’s a way to minimize your net tax bill,” Watson said.
If you have more losses than gains, you can generally use up to $ 3,000 a year to offset other federal tax revenues and report additional amounts in future years.
Tesla has a site on its website that provides some details on how it will handle Bitcoin purchases. The company did not respond to any email inquiries for additional information.