The prosecutor “will be hovering with his palms out” American customers should accept Elon Musk’s offer to buy one of Tesla’s cars using bitcoin (BTC), observers pointed out – with capital gains and income taxes a possible impediment for cryptocurrency payers. CNBC reported that there was a “turnaround” in the history of Tesla’s innovative movement – in the form of the Internal Revenue Service (IRS).
As a reminder, when an individual uses bitcoin to buy goods or services, he “is selling that cryptocurrency”. The IRS, according to the report, “treats bitcoin and its siblings as property whose sale comes with a gain or loss, depending on whether it is worth more or less than when you acquired it.” This fact has already led many BTC users to debate whether – theoretically speaking in many cases – it would be advantageous to buy a new Tesla now or wait in the hope that BTC prices will rise further, perhaps reaching the $ 100,000 mark. The same media quoted Garrett Watson, a senior policy analyst at the Tax Foundation, saying:
It is very important to know the cost base of any cryptocurrency – the amount when you bought it – and the time when it occurs. This will determine how much you are subject to tax and what tax rates you are paying.
Watson added that capital losses elsewhere could provide “a way to minimize your net tax bill” for concerned buyers who pay bitcoin. However, time seems to be everything when it comes to spending BTC on cars without the tax authority throwing a wrench at the factory. If an American buyer wanted to use the bitcoin assets they owned for less than a year, “any increase in value between when you bought it and when you use it to make a purchase is considered a short-term gain and would be taxed at rates income tax ”, explained CNBC. These rates currently vary and can be as low as 10% and up to 37%, depending on a person’s total income.
Watson added that capital losses elsewhere desired are a way of minimizing their net tax bill for concerned buyers who pay in bitcoin.
Let’s say you bought the cryptocurrency a year ago, when bitcoin was being traded for about $ 6,500. Spending about $ 38,000 to buy the new Tesla Model 3 would mean a gain of $ 31,500 – and that’s at the cheaper end of the spectrum for the electric vehicle. At the current rate on capital gains, this is a tax bill of $ 4,750 or more that you will have to pay – or almost as much as the amount you paid for your original bitcoin.
On Twitter, Coin Tracker’s head of tax strategy, Shehan Chandrasekera, had an affirmative (undesirable) three-letter answer to a Bloomberg employee who asked, “So, if someone bought a bitcoin last year and is sitting on a return 10x and then buy a Tesla with him, does he have to pay taxes on short-term capital gains in that transaction? ” Chandrasekera also responded to Musk’s tweet yesterday that noted the fact that Tesla would not attempt to convert any BTC payments he receives into cash, giving his opinion,
Retaining BTC without converting it to cash does not bring any benefit to the buyer. If you spend BTC to buy a Tesla, you will have to pay capital gains taxes on the difference between how much you paid for the currency and the market value at the time of spending.
And the Coin Tracker executive suggested that Tesla should have taken a step further to prove its true commitment to the crypto space, writing that “What would be really cool [seria Musk] pricing Teslas in BTC. No matter how much the dollar price of BTC is, you always pay X amount of coins. This is true adoption. ”Meanwhile, on Reddit, several news topics have seen users debate the virtues of whether or not to spend BTC on a Tesla. One suggested that buying a Tesla “with bitcoin instead of money” “would ensure that bitcoin is out of the market”. However, not everyone agreed with this strategy, with one responding sarcastically,
Donate the best performing asset of the 21st century to buy a car that depreciates the minute I leave the dealership’s parking lot. Great advice, my friend.
Others suggested that it would be “stupid” to accept Musk’s offer, as “someone who buys a Tesla with bitcoin can overpay by 50% within a few days of purchase”, considering the type of price volatility that the token has experienced lately . A Redditor came up with an innovative and ironic solution, writing:
I’m going to sell a banana tape NFT for $ 100,000 and buy a Tesla with that.
Whether this strategy would drive the IRS away or not, however, seems to be up for debate, as Chandrasekera told CNBC earlier this month. At the time of writing (09:05 UTC), BTC was trading at $ 52,620 and fell by almost 7% in one day and 11% in a week. It also fell 3% in a month, reducing its earnings in the last 12 months to 684%.