No good deed goes unpunished, especially when you are talking about Bitcoin donations.Odds are that if Joe made a donation to a charity in the past year, either he or the charity will have likely incurred a hefty tax liability.Three scenarios have presented themselves to date.In the first and most common scenario, Joe's preferred 501(c) charity (an organization approved by the IRS to collect tax-exempt donations) may not have created Bitcoin wallets or merchant accounts with services like Coinbase or BitPay.So if Joe cashed out some of his bitcoins to make a donation, he would be on the hook for those capital-gains taxes, even if the proceeds were earmarked for the express purpose of a donation.When Joe sold assets to make his December donation, he incurred either a 15% or 25% tax liability depending on which bitcoins he sold.But the good news is that he can also turn around and write off that entire donation against his ordinary income to the full extent allowable by law - in most cases up to 50% of his adjusted gross income.

In the second and optimal case, Joe might give to a registered charity that actually has a Bitcoin wallet address, and perhaps even a merchant account with a third-party service provider.This would offer him (and by extension, the charity) the most favorable tax case, assuming he donated assets that were held for longer than one year.(Note: If Joe planned to donate bitcoins that had accrued short-term gains, he would actually be better off cashing them out first and donating the proceeds under the first scenario.bitcoin price graph indiaOtherwise, he might only be able to write off his cost basis.bitcoin in het nieuwsFor instance, if Joe donated bitcoins purchased in January 2013 at $20, he would write off his $20 cost basis rather than the $900 fair market value at the time of his December donation.bitcoin percentage of total market capitalization

That's because the IRS allows him to write off the full fair-market value of donated property, which has been held for longer than a year (up to 30% of his adjusted gross income), without him or the charity paying any capital-gains taxes - huge win for Bitcoin investors and charities alike.In exchange for the tax benefit, there is one small bit of hassle; the recipient charities would need to file a Form 8283 showing their estimate of the fair-market value of any property contributions greater than $500, and Joe would also be required to file Form 8283 with his federal income-tax returns for cumulative property gifts exceeding $500 for the year.ethereal gem tradeThe final scenario presents the toughest one for both donors and "charities" to track.litecoin exchange indiaIn this case, donors make Bitcoin gifts to organizations that may have charitable purposes, but for whatever reason are not yet approved by the IRS.bitcoin nieuws 2017

Parties that have applied for tax-exempt status, but have yet to receive approval, such as the BitGive Foundation, may be on the hook to pay capital-gains taxes on donated property in the event their application is denied.Such an organization would need to know its donor's cost basis on the donation to accurately pay any capital-gains tax liability under "gift" tax laws.Joe might be able to write off his donation retroactively, if and when BitGive's "pending" 501(c) status is approved, but he runs the risk of not receiving any write-off for the full market value of his donation if BitGive is denied tax-exempt status.køb bitcoin med paypalIn fact, under those same "gift tax" laws, he himself might incur an additional tax liability.ethereum retirementWe're coming up to the tax filing deadline of April 15th.bitcoin davos

If you haven't yet started, just not clicked Submit or not put your return in the mail, here are 10 things individuals need to remember when including Bitcoins or other digital currencies in your tax return.When you are trading Bitcoins or digital currencies on an exchange, each sell order must be included in your capital gains calculations, even if you never withdrew the dollars to your own bank account.If you received USD, another foreign currency, or even another digital currency, you have potential capital gains/losses.If you sell or spend a Bitcoin that you can show you owned for more than a year, it is classed as long-term and any gains made will have favorable tax rates.The rate depends on your other income, but will wither be a flat 15% or 0%.There is a 20% rate for high income earners ($406,751 or more).Short-term capital gains and losses are combined, then long-term gains and losses, and finally these totals are combined into a net gain or loss.If you have a net loss you can use it to deduct up to $3,000 taxable income per year, saving yourself $750 in taxes (25% tax rate).

When you calculate capital gains the default and preferred method by the IRS is to use First-In-First-Out.This literally means that when you sell a Bitcoin you take the price of the first one you owned as the cost basis in order to calculate gains.There is something else called specific identification, where you choose which coin you want to sell.Some examples of this are Last-In-First-Out or Closest-First-Out.You might use these if you want to maximize long-term gains, maximize losses or even get close to zero gain.However, the IRS hasn't explicitly clarified which method you should use and so this is something you should talk through with your tax professional.The IRS treats mined coins as income on the day they are received.The value of the coin is its fair price or market value., of your choice as long as it is consistently used.While Bitcoin has established markets, some newer mined coins might not.How do you determine the market price of a new coin?This is another question yet to be clarified by the IRS and discussed with your tax professional.

You could treat a coin without a market as having zero value, or a coin with only a BTC market as having the relative price of BTC as its value.If you are paid in Bitcoins, as far as the IRS is concerned, you were paid in dollars.If you were paid by an employer, it is likely the figures have already been included in your W2 and there is nothing else you need to do.But if you received those coins, for example, from a consulting job, then you need to report the fair value of the coins as your income.Say you did some work that you would normally have been paid $1,000, but you received Bitcoins, then you report $1,000 as income in your taxes.If you just received some BTC with no equivalent USD value, then you must calculate the fair or market price of those Bitcoins when you received them, and that is your income.If you were tipped, as long as it was not for any provided product or service (i.e.you didn't earn it), then it is gift and not due taxes.If you were given the cost basis along with those tips, you can use this information to reduce any gains when you come to sell them.

However, you cannot take losses from the basis of these coins, but instead have to use the market value.For tax purposes, spending Bitcoins or any digital currency, is treated as if you had just sold them.If you bought a $100 gift card with Bitcoins, you effectively sold those Bitcoins for $100, and any potential capital gains must be calculated.There is no threshold for capital gains.Everything is supposed to be included.However, typically these figures are rounded on tax forms, so any gains less than $0.50 are ignored.Making charitable donations with Bitcoin has a tax advantage when they are long-term.When you donate long-term Bitcoins (that you have owned for more than a year) to a registered charity, you get to write off the full market value of those coins as charitable deductions.Short-term Bitcoin charitible donations can only deduct their original cost basis and not their market value.If you were ever audited and you need to account for any capital gains, especially long-term where the tax rate is reduced, you may have to show documentation to prove your position.