The winning of the Bitcoin is considered income on the day you received it. This would be reported as a miscellaneous type of income under 'Less Common Income' and the steps to enter it are shown below. The amount of the income is the US dollar amount on the day you won the bitcoins.
Long term is property held for more than one year (one year plus one day), and short term is held for one year or less.
Step 1: Please follow the instructions below to report Other Income:
- Click Federal Taxes -> Wages & Income and scroll down to Less Common Income
- Go to the last selection, Miscellaneous Income and click Start
- Go to the last option, Other reportable income and click Start
- When it asks, "Any other reportable income?" > yes and then type in a description and the amount to report it on your tax return.
- TurboTax Online and TurboTax CD/Download will use the same procedure
The sale of the bitcoin is reported on Schedule D as a sale of investment. This will have a cost basis (the amount you included in income in step one above) and sale price of the same amount because you sold it on the same day. It is important to include this transaction on the tax return even though there is no gain or loss. If you did have any expenses for the sale you can add that to the cost basis.
Step 2: Report your investment sale using the steps below.
- In TurboTax Online you will find Stocks, Cryptocurrency, Mutual Funds, Bonds, Other (1099-B) as a selection under Investment Income
- In TurboTax Desktop you will enter Cryptocurrency as a Stock, Mutual Funds, Bonds, Other, under Investment Income
- OR simply search for Cryptocurrency in the upper right
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