With the highest value of Bitcoin reaching $1,163, the popularity of this form of cryptocurrency has peaked in the last decade. Reuter reports have confirmed that the currency experienced a 125 percent growth in 2016, and the market and media frenzy over Bitcoin will only take it higher. A survey of Bitcoin-owning Americans shows that 11% of the population owns this currency.
But the real question is, can we buy it to improve our standard of living?
Why Is Bitcoin Useful
From Rolex watches to Apple gadgets, there’s a lot that you can buy with Bitcoin. But the latest statement by Elon Musk revealed on March 23 said that bitcoin owners can use their currency to buy Tesla cars too! Tesla four-wheelers are one of the hottest automobiles in the industry right now and will become all the rage as people start trading their bitcoin for the cars. Sounds too good to be true? You’re right; here’s the catch:
Bitcoin and Big Tax Bills
Investors are keen on accepting all forms of cryptocurrency if it serves their purpose. They have been observing bitcoin’s rally very closely in recent times. Even though the new Tesla deal sounds like a dream, investors aren’t blinded by the exuberance. They are aware that trading the currency for Tesla vehicles is not as easy as it seems.
Buyers will be eligible to pay huge tax bills on their holdings, especially those who were the first to invest in this cryptocurrency. Why is that so? It’s because the currency you bought last year will have appreciated in value at the time of selling, and the net capital gains should legally be taxed.
The larger the value of their holdings, the larger the tax bill. Trading bitcoin falls in the category of capital gains taxes, as monitored by the Internal Revenue Service (IRS). Not reporting capital gains on every transaction you make using bitcoin is a violation of the law and counts as tax evasion.
Bitcoin Endures as Store of Value
When the cryptocurrency was a novel contender in the investment market, people were wary of its use. However, as national currencies have depreciated during the pandemic, cryptocurrency has cemented its status as a reliable store of value.
Even the increasing tax expenditure is not deterring forward-thinking investors from looking into cryptocurrency. It’s important to note that Bitcoin won’t be converted with or traded for fiat money; they’ll add to the buyer’s crypto balance. And Tesla’s move is encouraging many to use them as a method of payment.
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