Tesla cars purchased through Bitcoin may lead to tax confusions

Purchases via Bitcoin may attract the IRS’s scrutiny
  • The electric car giant, Tesla, had allowed customers to trade their Bitcoins to purchase Tesla cars earlier on March 23
  • This move is in line with Tesla’s earlier enthusiasm with the ballooning crypto realm as it invested heavily in BTC
  • However, a lack of clarity surrounding procedures and regulatory mechanisms may lead to potential confusions about filing taxes

The era of crypto payments is finally here

It is astonishing to note that Bitcoin, the first and foremost crypto to be mined, is now trading at around $52,000, whereas it was at a relatively paltry $6,500 just a year ago. The sudden increase in trading volumes and prices can be attributed to a set of factors, including private firms’ enthusiastic investments. Tesla had pledged an investment of $1.5 billion in BTC which probably set the ball rolling for other private entities to do the same. MicroStrategy soon followed suit, followed by MasterCard and Visa’s decisions to amend their network to accept crypto payments.

Thus, it is almost poetic that Tesla has announced that it will begin accepting Bitcoins for Tesla EVs purchases in the US. This move is later expected to encompass non-US markets by the end of this year. Moreover, CEO Elon Musk also stated that any BTC received by the company would not be converted to fiat currencies.

Will BTC payers be taxed?

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Consider two people Alex and Bob, who both have one BTC each. While Alex purchased his BTC a year ago, Bob just recently acquired his token and both want to buy a Tesla Model 3 priced at $38,000 with Bitcoin. In this scenario, Alex would have to report a cash gain of $31,500, making him liable to pay $4,750 as taxes, whereas Bob would report a cash loss-making him eligible for tax deductions. This makes the subject of payments with BTC slightly vague and controversial.

Tesla also stated that they would provide the dollar price and the Bitcoin-equivalent price (BEP) of services and products to customers. If a customer opts for BTC payments, then he/she must begin the transaction of the BEP within a stipulated time frame called the Bitcoin Price Window. If the transaction is not processed within the window, it will expire, prompting the customer to request a new BEP and Bitcoin Price Window.

Though this move is a welcome step in the right direction, many issues are yet to be ironed out before several people begin using this feature.

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Steve Anderrsonhttp://www.thecoinrepublic.com
Steve Anderson is an Australian crypto enthusiast. He is a specialist in management and trading for over 5 years. Steve has worked as a crypto trader, he loves learning about decentralisation, understanding the true potential of the blockchain.

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