Whether you’re a long time technophile or newly computer literate, your use of technology can affect your income tax return. Read below to learn about virtual transactions that can have taxable consequences on your individual income tax return.
- Proceeds from sales of goods and services on Internet marketplaces can be taxable. This is the case whether you’re a hobbyist or running a business online. Depending on your level of activity, tax rules may limit your deductions.
- Receipts from crowd-funding sites such as indiegogo, gofundme or kickstarter – where you raise money from others to fund a project – most likely will be taxable income. You probably think of the money as a gift but when the people providing the funds get something in exchange, such as a reward for participating, the amounts you receive are typically considered income from a sale. It is extremely important that you keep track of all expenses related to the project and document how you spent the money.
Payments you receive in the form of virtual currency (i.e. bitcoin) for goods and services are includible in your gross income at fair market value. Other transactions involving virtual currency, such as the sale or exchange of the currency, can result in taxable gains or losses. Under guidance issued in 2014, the IRS treats virtual currency as property.
- Money received from listing your home on websites offering temporary or short-term lodging is generally reportable as rental income. The tax impact can vary based on the length and frequency of the rental activity.
Questions? Give us a call (757) 926-4109. We’ll help you sort out the real-world consequences of all of your virtual transactions.