Tax Tip #217

A young married couple domiciled in Florida earns $54,000 and has no other income or deductions. Their federal tax liability is approximately $3,000. A few years ago, the couple invested in Bitcoin and sold it in 2024 for a $40,000 gain. 

Q: What is the couples federal tax liability? 

• A) $3,000 — the couple doesn’t report the Bitcoin gain thinking the government will never know

• B) $3,000 — the couple does report the Bitcoin gain 

• C) $9,000 ($40,000 x 15% capital gains tax) 

• D) It depends (always a good answer when you do not know the answer) 

The answer is A, B and D, because you can make the case for both A & B. Answer A, but the couple now extends the statute of limitations from 3 years to 6 years (see Tax Tip 88); answer B because IRS code states that if your income is under a certain threshold (in 2024 for MFJ, that is approximately $94,000), then capital gains are not taxed.