In 2014, the IRS released a document outlining how they plan on taxing Bitcoin. The document, titled NOTICE 2014-21, lays out the foundation of their policy with treats Bitcoin like property. Choosing this method of taxation maximizes the revenues the governments receives from Bitcoin miners as long as the price of Bitcoin is rising (relative to USD). We will present a quick example to show the annual tax haul of the federal government in two scenarios, one in which the relative value of BTC to USD is falling, and the other in which BTC to USD is rising.
Scenario 1: Bitcoin loosing value against the dollar
INCOME TAX + CAP GAINS = $0
CAP GAINS only =$360
Scenario 2: Bitcoin gaining value against the dollar
INCOME TAX + CAP GAINS = $1,365
CAP GAINS only =$1,020