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I invested in Bit Coin and I put in 10K, now I want to take…

I invested in Bit...

I invested in Bit Coin and I put in 10K, now I want to take out my 10K will I be taxed on the portion i invested?

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If you are investing, do you have to pay tax on the monies you are investing?

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Answered in 3 minutes by:
11/14/2017
Chad EA, CDFA®, CFP®
Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional
Category: Tax
Satisfied Customers: 2,637
Experience: IRS Licensed Enrolled Agent, CDFA ® CFP ®, MBA
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Welcome to JustAnswer! My name is ***** ***** I will be able to assist you today.

The IRS treats bit coin as a Capital Asset and therefore you are taxed on gains and losses as any other capital asset.

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Capital gains are reported using Schedule D of the 1040

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Customer reply replied 8 months ago
Thank you

Here is a link to the IRS Notice 2014-21 which speaks about how to treat the bitcoin for tax purposes.

https://www.irs.gov/pub/irs-drop/n-14-21.pdf

SECTION 4. FREQUENTLY ASKED QUESTIONS Q-1: How is virtual currency treated for federal tax purposes?

A-1: For federal tax purposes, virtual currency is treated as property. General tax principles applicable to property transactions apply to transactions using virtual currency

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    If you do have any further questions please let me know!

    Any gains or losses would be after you subtract your initial investment of $10,000

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    Customer reply replied 8 months ago
    does that mean I won't be taxed on my original $10,000?

    Exactly!

    Your original investment of $10,000 is a return of your principal. You then either claim a gain or loss depending on what you received back in USD for you original investment.

    For example: If you received $11,000 then you had a capital gain of $1,000

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    Customer reply replied 8 months ago
    Ok, that is what I was wondering, If I pulled out my original investment of $10,000 and left the gains in bit coins, I just wanted to make sure that I won't be taxed on it.
    Customer reply replied 8 months ago
    Thanks again, have a great day!

    Just make sure that you keep the transaction receipts and also note on the receipts that the withdraw was a return of your principal or initial investment.

    Have a great day!

    Chad EA, CDFA®, CFP®
    Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional
    Category: Tax
    Satisfied Customers: 2,637
    Experience: IRS Licensed Enrolled Agent, CDFA ® CFP ®, MBA
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    Chad EA, CDFA®, CFP® and 87 other Tax Specialists are ready to help you
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