Earlier this week, Tesla CEO Elon Musk announced that the company has started accepting Bitcoin payments against the purchase of any Tesla model. While this news certainly sparked excitement among Bitcoin investors and Tesla fans, there’s a moment of caution to observe.
Ark Investment’s Cathie Wood is a bit unsure of whether investors should really buy Tesla with Bitcoin. During a webcast hosted by the CBOE, Wood warned Bitcoin (BTC) investors not to get swayed by the offer until they really understand the tax code. Wood said that any decision in a hurry could possibly attract scrutiny from the IRS, as investors might face massive taxes.
“The IRS has something to say about this, so if you have huge gains in your bitcoin, I don’t think I would bear much in the way of transactions until we get maybe some changes on the tax front,” Wood said.
Understanding the Bitcoin Tax Code
Under the recent tax code, the IRS considers Bitcoin and other digital currencies as “property”, similar to bonds and stocks. Thus, the use of Bitcoin to purchase any goods/services could lead to massive capital gains taxes. The percentage of tax a person pays depends on how long the investor has been holding the assets.
Even if the period of holding is above 1 year, the capital gains taxes are anywhere between 15-20%. Wood’s comments came just two days after Elon Musk made the announcement.
Cathie Wood has been a huge advocate of Bitcoin (BTC) with her company also having some exposure to the world’s largest cryptocurrency. However, Wood sees Bitcoin (BTC) more like a “store of value” aka digital gold instead of a medium of transaction.
