Did you know that purchasing a cup of coffee with Bitcoin or any other cryptocurrency has tax consequences?
When you make that purchase, you are selling a small portion of your Bitcoin. The IRS considers that a sale of assets. Therefore, in the United States, it needs to be reported on your 1040 form.
That transaction involves a gain or a loss from your actual purchase of the cryptocurrency used to buy that coffee. That can make recordkeeping unmanageable. We need to keep a record of every transaction when shopping for merchandise if we use cryptocurrency to buy anything.
For that reason, cryptocurrency might be used mainly for wealth storage and not necessarily for commerce in the future.
On the other hand, blockchain technology has many advantages that could bring a new way of life in the near future.
I wrote an article in ToughNickel examining how blockchain technology and cryptocurrency affect banking, commerce, and your money. And I cover related subjects such as:
The volatility of cryptocurrency, a discussion of digital wallets, the trustworthiness of blockchain, and how blockchain will transform business with added security. I also give you an understanding of your tax obligations with cryptocurrency.
For further reading, see “Your Money and the Future of Blockchain and Cryptocurrency
