Tax implications of BTC for rent

Question

I'm considering doing a trial run with my tenants and let them pay some or all of their rent in BTC.
My motivations:

BTC isn't considered a currency so it's taxed as an asset under capital gains tax.

I can afford to keep some, if not most, of the rent in BTC and only cash out a small portion to pay the mortgage.

The plan:

Each month, the tenant would visit a portal I have set up to pay their rent via BTC. They would pay the USD equivalent in BTC.

I would offer a discount to tenants if they pay in BTC to motivate them.

I would only turn what I need back into fiat to defer paying taxes on it immediately.

Things I'm not concerned about:

The volatility of the BTC market

My questions:

What are the tax implications of accepting an asset as rent?

When are you taxed on that asset?

Shawaron · Accepted Answer

Barter is a taxable event. You would owe taxes on the full fair market value of the Bitcoin the moment that you trade housing for it. Things would work the same way if you bartered baseball cards or a car for rent.

Later, if it appreciated, the appreciation would be taxed as capital gains. But the original receipt is regular income.

Later, if it appreciated, the appreciation would be taxed as capital gains.  But the original receipt is regular income.

brt · Answer

BTC isn't considered a currency so it's taxed as an asset under
  capital gains tax

This statement is wrong. Let's say you charge 1 BTC rent on Nov 1st. From the IRS standpoint your earnings are the dollar value of 1 BTC on Nov 1st, so that's approx $6k. You will be charged income taxes on $6k. Now, if you keep your Bitcoin until the end of the year and Bitcoin goes up to $10k of value and you sell your Bitcoin at the end of the year, you will owe income taxes on $6k and will have to pay capital gains on your $4k profit when selling your Bitcoin.

Acccumulation · Answer

BTC isn't considered a currency so it's taxed as an asset under capital gains tax

You have a fundamental misstatement of federal tax concepts. Income tax is on ... income. Neither currency nor assets are taxed by the IRS. The IRS only taxes transactions. Those transactions may involve currency and/or assets, but it's not the currency or assets that are being taxed. If you receive $6000 worth of bitcoin as rent in 2017, then you have a $6000 transaction, and you owe income tax on that transaction. If you later sell that BTC for $10000 in 2020, then you owe capital gains tax on the $4000 profit. From 2017 to 2020, if the BTC isn't involved in any transactions, then there will be no tax on it.

Tax implications of BTC for rent

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