Comment: “materiality“

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“materiality“

If you convert your bitcoins to fiat currency and then make everyday purchases using dollars, it will be relatively easy to report the short or long-term capital gains that single transaction.
But if you use the bitcoins in your wallet to purchase goods directly, then theoretically, the IRS should be informed of the capital gains incurred on the bitcoin at the time of the purchase, pointed out various tax attorneys that CoinDesk quizzed yesterday.

In practice, though, it seems unlikely that anyone would do this. Greg Broiles, an attorney specializing in estate planning, trust and probate, who spoke on bitcoin and taxation at Bitcoin 2013, argues that accountants have a concept called “materiality“. This essentially argues that transactions should only be included for accounting purposes when they’re significant enough. An $8 sandwich paid for in bit coins probably doesn’t count. A $30,000 Harley probably would, though.

the irs regulations are still being worked out and will change after the public comments period and official regulations.

Also,

some people who live off long term cap gains may not have to report those gains unless they total over 36k per individual per year or 72k for a joint filling.

"For lower-income individuals, the rate may be 0% on some or all of the net capital gain." http://www.irs.gov/uac/Ten-Important-Facts-About-Capital-Gai...

from what i understand if you make less than around $9500 a year from income (lower-income individuals) you don't have to file taxes and your cap gains are taxed at 0% until you hit around 36k per individual or around 72k for a joint filing. i'm not sure if you have to report them but what i was told is you don't have to pay taxes on them unless you go over 36k/72k. so you would pay 15% on all lt cap gains over 36k/72k and i guess also report everything. the trick seems to be spending under 36k/72k in gains per year.

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