Although paying with crypto is now easier than ever, there are a few tax implications that buyers should be aware of before they link their wallets and start shopping. The biggest issue is that paying for real-life goods with crypto coins is considered the same as selling an investment by the IRS. So, if the value of that coin has gone up between when the buyer purchased it and when they spent it, they could be liable for capital gains tax. Likewise, if it has gone down, it could be considered a tax write-off. With bitcoin and its rivals being as volatile as they are, it means that, in theory, every store transaction purchased with crypto might have to be listed on a tax return at the end of the year.
Now, this isn’t necessarily a dealbreaker, as platforms like PayPal do keep track of taxable transactions and include the relevant tax forms for buyers at the end of the year. But not every payment processor is so helpful, so buyers paying with crypto across multiple platforms might find themselves having to work out gains and losses on each individual transaction when it’s time to fill out their returns. Hopefully, regulators and exchanges will find a way around this in the near future. But for now, it’s a big limitation on the current system, and it offsets much of the convenience that paying with crypto can bring.
