The IRS rules Bitcoin as property and enforces capital gains taxes on it

On March 25, 2014, the Internal Revenue Service (IRS) issued a significant notice regarding the taxation of Bitcoin and other cryptocurrencies. This notice, identified as IRS Notice 2014-21, clarified that for U.S. federal tax purposes, virtual currencies like Bitcoin would be treated as property and thus capital gains atx would be applied.
 

The notice provided guidance on how existing general tax principles apply to transactions using virtual currency.According to the notice, general tax principles that apply to property transactions also apply to transactions using virtual currency. This meant that gains from exchanging such property would be considered capital income and taxed as capital gains.

Capital gains from Bitcoin and other cryptocurrencies are reported on tax forms as part of Schedule D, similar to stocks and shares. The ruling was a pivotal moment for Bitcoin users and investors, as it defined the tax obligations for virtual currency transactions and holdings. The notice required that all crypto-currencies should be treated as property for tax purposes, which affected how investors and users reported and paid taxes on their cryptocurrency transactions.