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Comment by Frogolocalypse | Hacker News Reader

I have a bitcoin debit card. I use it every other day. I call it my magic internet beer money card.

Legitimately curious how a bitcoin debit card works

Put x$ in bitcoin on card exchange. Put y$ in card account. Use card from y$. 15 minutes or so later, y$ account is topped up from x$ account. Txn never touches the chain. Sure it's a risk having a bit of money on an exchange, but that is the price of convenience. When the amount on exchange is too high, i shift to my bitcoin wallet.

Does this complicate filing your taxes?

Nope. As long as the money i spend on the card is less than the money i place on it i only have unrealised capital gains. If and when i want to spend more than that, i will have to pay capital gains on that component. It's no different than a high interest savings account.

That's what bitcoin is; A decentralized banking account. Except you are your own bank.

I thought what you meant by it reloading USD from btc would mean a sale of btc (which is taxable event?), no?

The event doesn't lead to a capital gain.

Ok my knowledge of tax is shaky at best, but this is confusing.

Timeline:

day 1: you buy bitcoin (or mine it and take tax as gross income), bitcoin is valued at $1k USD / bitcoin, you bought 1 bitcoin

day 10: you use the $100 in your debit card to buy many beers, bitcoin is valued at $1.1k USD / bitcoin

day 10 +15 minutes: something sells some of your bitcoin to replenish $100 in your debit card

You now have 10/11th of a bitcoin, valued at $1000 USD, plus $100 of taxable gain for which you probably need to pay the IRS like $15 or something. Or what's wrong in my timeline there?

I would suggest contacting a tax-accountant in your jurisdiction if you are unclear of your obligations. Every place will have different requirements.

K I'll ask my CPA in a bit

Ok yo, at least for US jurisdiction you would need to report those individual bitcoin sales as taxable cap gains events (either loss or gain depending on the cost basis). Does whatever exchange you're using make calculating cost basis easy? Like do they send you an 8949 or all the details easy to fill out? Otherwise that sounds like a huge pain to get everything straight for every purchase (even if it's just daily sales). If the exchange makes it easy it might not be that bad. My 8949 / sched D already got like dozen+ entries on it, what's a few dozen more? lol. But if the exchange doesn't provide easy cost basis and makes you calc it on your own, ugghh no thanks.

They also went into some detail about wash sales, which is going over my head.

But yea this sounds like it would vastly complicate your tax preparation. Unless you just don't report it and cross your fingers that you don't get audited I guess?

Of course, this is now 3rd hand from a CPA, and only applies for US federal taxes.

I don't live in the US. Good info to have in the US if you do though.

If that is true, there should exist cards that let you load other assets on them to cover the cost of spending. Like a card that sells your Google stock to cover the cost of your beer. The ability to sell capital assets without paying tax should make these cards very popular.

If these cards do not exist or are not popular, I would take that as evidence that selling a capital asset is taxable, whether or not it was triggered by a card purchase.

It is true where I come from. America is not the only country in the world you know. In fact, it is one of many. I have no desire to live there again TBH.

>As long as the money i spend on the card is less than the money i place on it i only have unrealised capital gains.

Either you aren't in the US, or you don't understand how capital gains work. What you describe is exactly a taxable event (could be a loss, could be a gain).

Selling X shares of a capital asset for $Y is always taxable, no matter if you also buy X more shares, or $Y more in the same period of time. See also: wash sale [0].

[0] https://www.investopedia.com/terms/w/washsalerule.asp

I am not in the US.

https://en.wikipedia.org/wiki/Capital_gains_tax_in_Australia

> CGT operates by having net gains treated as taxable income in the tax year an asset is sold or otherwise disposed of.

Why is this preferable to using a credit card? The only "advantage" I ever see people mention is "no chargebacks," but that's not in my interest, as a buyer.

> Why is this preferable to using a credit card?

My money isn't being debased while I hold it. Quite the opposite.

In that case the credit card is even better, because your debt is being "debased" until you get a bill.

I prefer to control my expenses thanks. Going into debt to pay for my consumption is not how I like to manage risk.

Anybody sensible who is making a software engineer's salary pays off credit cards in full at the end of each month, which is only "going into debt" in the most technical sense and incurs no interest charges.

You are, of course, always free to exercise whatever risk profile suits your requirements. I don't like that system thanks. If it works for you, who am I to criticize?

What exactly is the "risk"? That I won't have the exact same money I would spend now in two weeks?

it's a visa card that you send BTC to your account and when you spend they remove the amount of BTC at the current exchange rate

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