Should Bitcoin Investors Become ‘Traders’ for Tax Purposes?

The new tax law’s elimination of miscellaneous itemized deductions has bitcoin investors asking whether they should re-categorize themselves as “traders” for tax purposes—but they may want to proceed with caution.

Under prior law, taxpayers could use the miscellaneous deduction to write off certain investment-related expenses that exceeded 2 percent of their adjusted gross income.

Virtual currency investors were permitted to write off trading expenses—such as computer and internet, subscriptions to cryptocurrency-related sites, software subscriptions, specialized computer equipment—even if they weren’t trading bitcoin as an occupation, Jeff Vandrew Jr., an attorney and CPA at Vandrew LLC in New Jersey, whose practice ...