IRS Rules Bitcoin is Property, Not Currency

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The Internal Revenue Service said Tuesday that it will treat bitcoin and other virtual currencies like property, not currency, giving a potential boost to investors but imposing extensive record-keeping rules—and significant taxes—on its use.

The announcement in general was expected to be greeted favorably by the fledgling industry, and many had anticipated exactly this result. But the announcement also served as a reminder that new technologies often can't avoid being subject to the old rules for long.

In a notice, the IRS said that it generally would treat Bitcoin held by investors much like stock or other intangible property. If the virtual currency is held for investment, any gains would be treated as capital gains, meaning they could be subject to lower tax rates.