3 Common Cryptocurrency Tax “Loopholes” and Why They Don’t Work
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More and more, people are spending their bitcoins on real estate. But is it a good idea to use bitcoin to buy a house? And how would you do it?
Bitcoin is no stranger to controversy. Bitcoin is a cryptocurrency — a decentralized, digital currency not controlled or backed by any bank or government — built on a technology called the blockchain. As interest bitcoin avoid taxes on real estate bitcoin intensifies, a growing number of businesses now accept it as payment. In Septembera man used bitcoin to purchase a home in Austin, Texas. In Januarya recent college graduate cashed out several types of cryptocurrencies — including bitcoin cash, an offshoot of bitcoin created last year — to pay the down payment on a Seattle-area home.
The first bitcoin avoid taxes on real estate to buying a house with bitcoin is bitcoin avoid taxes on real estate find a seller willing to accept bitcoin as payment. It can simplify the transaction if the seller is willing to accept bitcoin directly.
The transaction would basically proceed like a cash sale, but with bitcoins instead of dollars. Depending on a number of factors, including network congestion, it could take 10 minutes or a couple days.
Keep in mind that services to convert bitcoin into cash charge fees. Read the fine print ahead of time. While a home seller might accept a bitcoin offer, lenders to date will not accept bitcoin for your mortgage payment. Exact documentation requirements may vary by lender. Before you convert to cash, check with the bitcoin exchange to ensure it can provide the proper documentation.
Some lenders may also want you to sign bitcoin avoid taxes on real estate declaration indicating that the money is the result of a bitcoin sale and that you have not taken on any new debt. That means when you exchange bitcoin for cash, any capital gains are taxable, between 15 percent and 20 percent, depending on how long you had the bitcoins.
If the seller is willing to accept the bitcoin as such without requiring you to convert it into U. But in the few bitcoin real estate transactions that have taken place, home sellers almost always require buyers to convert their bitcoins to cash. What about other cryptocurrencies? Can you buy a house with ethereum, litecoin, monero or ripple, to name a few of the most noteworthy bitcoin rivals? The mechanics are largely the same.
Bitcoin avoid taxes on real estate remember, you have to pass that first hurdle to make the transaction work: But keep in mind that only a handful of real estate bitcoin avoid taxes on real estate using bitcoin have taken place, and bitcoin is the predominant cryptocurrency. It will be difficult to find bitcoin avoid taxes on real estate seller willing to accept other cryptocurrencies as payment. Perhaps that will change as cryptocurrencies in general are more widely adopted, but until then, you may want to save yourself the headache: Stick with bitcoin or even regular old cash.
Read more about Buying a Home. What are home sellers required to tell buyers? How to negotiate repairs after a home inspection. Forgot username or password? How to buy real estate with bitcoin. Key Points Buying real estate with bitcoin Bitcoin is a decentralized digital currency built on blockchain technology. The blockchain is a permanent, unalterable public record of bitcoin transactions. You can either trade bitcoins to buy a house, or convert them to cash.
If using bitcoin proceeds for a down payment, you must document the source of the funds. When you sell bitcoins, the proceeds are subject to capital gains taxes. Any other real estate taxes will need to be paid in a fiat currency, such as U. Buying real estate with bitcoin People have used bitcoin to purchase homes throughout the country. Other cryptocurrencies What about other cryptocurrencies? Email this page to. Send me a copy of this email.
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