It finally happened; Bitcoin has hit the $100,000 mark. From its humble beginnings in 2009, when it was valued at zero, to this historic moment, the road has been filled with tons of volatility, breakthroughs and global adoption. This is great news for the wallets of those who own Bitcoin, but it may mean something different when it comes time to complete their tax return.

First things first, let’s talk about how Bitcoin is taxed in general. The IRS treats Bitcoin as property, which means its subject to capital gains when sold or traded. The sales transactions will be reported on Form 1099-B. If Bitcoin is held for longer than a year, the taxpayer will be subject to long-term capital gains.

If Bitcoin is held for less than a year before selling, then it will be taxed at a short-term capital gain rate, which can be as high as ordinary income tax rate. Now, you may have received emails or phone calls from clients who are considering selling Bitcoin now that has hit the $100,000 mark. What would you tell your clients when they asked about the tax consequences of selling Bitcoin right now, and how much in taxes would they have to pay?

If the client is ready to sell Bitcoin because it reached the mark of $100,000, beware that selling it will be a taxable event. Long-term capital gains are taxed at 0%, 15% or 20%, while short-term capital gains are taxed at regular income tax rate 10% to 37% in 2024 depending on taxpayer’s income.

Let’s take a look at an example. Your client Cooper bought Bitcoin for $5,000 back in 2015 and sold it for $100,000 in 2024. Cooper made a $95,000 profit. If Cooper held the Bitcoin for over a year, that profit will be taxed as long-term capital gains, which could be anywhere from 0% to 20% depending on Cooper’s income bracket. Now, let’s assume Cooper’s taxable income is $25,000.

Since Cooper’s taxable income is $25,000, you need to add the $95,000 Bitcoin profit, making Cooper’s total taxable income $120,000. This amount determines the capital gains tax rate Cooper will pay. The first $44,625 of Cooper’s income will be taxed at 0%, since it falls within the 0% bracket. The remaining income above $44,625 ($120,000 - $44,625 = $75,375) is taxed at 15%. Therefore, Cooper is taxed at 0% of his $44,625, and 15% for his $75,375. How much tax will he need to pay, based on these calculations?

Cooper will pay $11,306.25 ($75,375 x 15%).

Bitcoin’s rise to $100,000 is a game changer, but with great profits come great tax responsibilities. The popularity of Bitcoin now and in the future provides tax preparers with more opportunities to help existing and future clients make the best of their financial situations.

To learn more about reporting virtual currency and digital assets like Bitcoin, attend NATP’s on-demand webinar, Introduction to Digital Assets.

UPDATE: On Dec. 26, 2024, the 5th Circuit Court reversed an earlier stay, reinstating a preliminary injunction that prevents the Financial Crimes Enforcement Network (FinCEN) from enforcing the BOI filing requirements:

“However, in order to preserve the constitutional status quo while the merits panel considers the parties’ weighty substantive arguments, that part of the motions-panel order granting the Government’s motion to stay the district court’s preliminary injunction enjoining enforcement of the CTA and the Reporting Rule is VACATED”

This ruling concludes that, while the court considers the appeal, the injunction stands, and BOI reporting is not required until a court decision is reached, providing a clear status update. 

We’ll continue to provide updates on this evolving issue.

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Dec. 23, 2024: The 5th Circuit Court of Appeals has granted the government’s emergency motion to stay a Texas district court’s nationwide injunction against the Corporate Transparency Act (CTA). CTA requires nonexempt companies to report their beneficial owners. Before the Texas court’s injunction, specified businesses formed prior to 2024 were required to file their initial beneficial ownership information (BOI) report with the Financial Crimes Enforcement Network (FinCEN) by Jan. 1, 2025, and new businesses were required to file within 30 days.

The stay means the CTA is now in effect. The court found that the government is likely to succeed on appeal, that leaving the injunction in place could cause significant harm, and that the public interest in preventing financial crimes outweighs any harm to the plaintiffs. The case will proceed quickly to the next available oral argument panel. FinCEN has yet to issue a response to the 5th Circuit’s order.

In its budget discussions of last week, Congress did not extend the BOI compliance deadline for existing businesses to Jan. 1, 2026, so the original deadline of Jan. 1, 2025, remains in place. As a result, the 5th Circuit’s decision has immediate implications for affected businesses.

As we previously advised, it is best to file these reports as soon as possible given the few remaining days left before the Jan. 1, 2025, due date. If you need education on this topic, we have an on-demand webinar available: Corporate Transparency Act: Reporting the BOI with FinCEN. This webinar is free for Premium level members. Professional level members can use code FREECPE at checkout to redeem a 1 or 2 CPE webinar per membership period.

We will continue to monitor developments and alert you to any changes or updates as they occur.

The holiday season is here, and it’s time to show the tax pro in your life just how much you appreciate their number-crunching, deduction-finding magic. They work hard all year (and extra hard during tax season), so why not surprise them with a gift that’s as thoughtful and unique as they are? We’ve rounded up some fun, practical and quirky gift ideas that are sure to make any tax professional smile.

1. Comfy office vibes

Tax season = long hours at the desk. Give the gift of comfort with ergonomic office goodies like a supportive chair cushion, a standing desk converter or even a heated blanket for those late nights. Bonus points if it makes their office feel like a cozy sanctuary!

2. Fancy coffee or tea setups

Fuel is everything when deadlines are looming. Treat them to a coffee or tea upgrade with a fancy brewing system, a selection of gourmet blends or an insulated mug that keeps their drink hot for hours. If they’re really into caffeine, throw in a cheeky mug with “Tax Pro Fuel” written on it.

3. Desk gadgets and organizers

Who doesn’t love a more organized workspace? Help them banish the clutter with fun and functional desk accessories like colorful file holders, tech-friendly charging stations or even a desktop organizer shaped like a retro calculator.

4. Stress relief for tax season

When the pressure’s on, relaxation is key. Think aromatherapy diffusers with calming scents, a weighted blanket to melt the stress away, or a stress ball shaped like, you guessed it, a calculator. Because let’s face it – every tax pro could use a little Zen in their life.

5. Tax-themed fun (because why not?)

Lighten the mood with quirky tax-themed gifts! Socks covered in dollar signs, a calendar with tax tips or jokes, or a T-shirt that says, “I Excel at taxes” will show you appreciate their sense of humor. For extra laughs, you could even give them a framed picture of their favorite IRS form.

6. Snacks and treats for late nights

Nothing says “I care” like snacks! A gourmet snack box, a subscription to a cookie delivery service or even tax-themed cookies shaped like dollar bills and calculators are perfect for powering through those marathon work sessions.

7. The ultimate gift: NATP membership

Here’s a gift that’s a total game-changer. An NATP membership gives them access to education, resources and a community of fellow tax pros who get it. It’s the gift that keeps on giving, helping them stay sharp and ahead of the curve all year long.

The best gifts are the ones that show how much you care – and maybe give them a little extra boost as they head into the busy season. Whether it’s something cozy, funny or just plain practical, your tax pro is sure to appreciate the thought.

From all of us at NATP, happy holidays! May your season be filled with joy, laughter and minimal last-minute tax law change.