IRS May Tax Your Bitcoin Purchase Of A Tesla As Capital Gains

Tesla rolled out its Bitcoin payment option on Tuesday, marking yet another milestone for the company. But while paying for electric cars using Bitcoin is an exciting idea, Tesla’s cryptocurrency transactions will have some tax consequences.

CNBC reported that Teslas purchased with Bitcoin might come with “big tax bills.” The Internal Revenue Service (IRS) treats virtual currency as property for federal tax purposes in the United States, as per Publication 544. As such, capital gains taxes will apply to the purchase of Tesla cars bought with Bitcoin. However, the amount a person will be taxed might differ and depend on when they purchased their Bitcoin.

Tesla CEO Elon Musk stated that the company would be using only internal and open-source [sic] software to operate Bitcoin nodes directly. “Bitcoin paid to Tesla will be retained as Bitcoin, not coverted to fiat currency,” Musk explained on Twitter.