The taxman “will be hovering with palms out” should American customers decide to take up Elon Musk’s offer of buying one of Tesla’s cars using bitcoin (BTC), observers have pointed out – with capital gains and income tax levies a possible deterrent for would-be crypto-paying customers.
CNBC reported that there was a “twist” to the tale of Telsa’s ground-breaking move – in the shape of the Internal Revenue Service (IRS).
As a reminder, when an individual uses bitcoin to buy goods or services, they “are in effect selling that cryptocurrency.”
The IRS, per the report, “treats bitcoin and its brethren as property whose sale comes with either a gain or loss depending on whether it is worth more or less than when you acquired it.”
This fact has already led many BTC users to debate whether – theoretically speaking in many cases – it would be advantageous to buy a new Tesla now or wait in the hope that BTC prices climb higher, perhaps reaching the USD 100,000 mark.
The same media outlet quoted Garrett Watson, a senior policy analyst at the Tax Foundation, as stating,
“Say you bought into crypto a year ago, when bitcoin was trading at about USD 6,500. Spending around USD 38,000 to buy the new Tesla Model 3 would mean cashing in a gain of USD 31,500 – and that’s on the cheaper end of the spectrum for the electric vehicle. At the current rate on capital gains, that’s a USD 4,750 or so tax bill you’ll have to foot – or almost as much as the amount you paid for your original bitcoin.”
On Twitter, Coin Tracker’s Head of Tax Strategy Shehan Chandrasekera had an (unwelcome) three-letter answer in the affirmative to a Bloomberg contributor who had asked:
“So if someone bought a bitcoin last year and is sitting on a 10x return, and then buys a Tesla with it, do they have to pay short-term capital gains taxes on that transaction?”
Chandrasekera also responded to Musk’s tweet yesterday that made note of the fact that Tesla would not seek to convert any BTC payments it receives into cash, opining,
“Give away the best performing asset of the 21st Century to buy a car that depreciates the minute I drive it off the dealership lot. Great advice my friend.”
Others suggested that it would be “dumb” to take up Musk’s offer as “someone buying a Tesla with bitcoin could overpay by 50% within a few days of the purchase” considering the sort of price volatility the token has experienced of late.
One Redditor came up with an innovative, tongue-in-cheek solution, writing:
