WASHINGTON (March 25, 2014) The U.S. Internal Revenue Service says virtual currencies such as bitcoin will be taxed as property.
The IRS says bitcoin is not legal tender and says it can’t be used to pay taxes.
But workers who are paid in bitcoin will have to pay taxes on their earnings.
The IRS issued a series of 16 questions and answers Tuesday to clarify the tax treatment of virtual currencies like bitcoin.
In general, the IRS says it will be treated as is other property that is traded.
Investors who buy bitcoins that then increase in value will have to pay capital gains taxes after they sell them, the IRS said.