If I purchased a total of $8000 of bitcoin in 2018 and sold $8000 of bitcoin in 2020 (but still have .25 bitcoin left), do I need to report this? And how?

Forum|Forum|5 years ago
February 25, 2021
1 reply
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three purchase transactions in 2018 and 2 sale transactions in 2020. I called and spoke to a live agent who had no idea what I was talking about. I tried inputting all of the purchases and sales into turbotax, but I have 3 purchases and 2 sales, and I couldn't figure out how to do that.

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DaveF1006

Level 15

Actually you will report your sales by doing the following.

Federal>income and expenses>investment income>show more
Scroll to Cryptocurrency>start

Note: According to IRS Notice 2014-21, the IRS classifies cryptocurrencies as property, not cash or currency. Purchasing cryptocurrency with cash and holding on to it isn't a taxable transaction, but selling, exchanging, or using it to purchase goods and services is. if you purchase it with cash, you would not report it.

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Opus 17

Level 15

The purchases aren't entered, only the sales. You tax on the difference between your cost and the sales proceeds.

Let's take the price on 7/1/2018 ($6400) and the price on 7/1/2020 ($9145) as examples.

That means you would have bought 1.25 BTC.

Suppose you sold 1 BTC on 7/1/2020 and made $9145, leaving you with 0.25 BTC remaining in your account.

The 1 BTC you bought had a basis of $6400, so you bought something worth $6400 and sold it for $9145, your taxable profit (capital gain) would be $2745.

Then in the future, whenever you sell that last 0.25BTC, your basis will be $1600 (because you paid $6400 per BTC) so the difference between that basis and the selling price will be your taxable profit when you sell.