If you held the bitcoin for a year or less, this is a short-term gain so it’s taxed as ordinary income according to your tax bracket. The IRS has made it mandatory to report bitcoin transactions of all kinds, no matter how small in value. If a virtual currency is listed on an exchange and the exchange rate is established by market supply and demand, the fair market value of the virtual currency is determined by converting the virtual currency into U. And keep an eye on the tax rates. Please visit Zillow Home Page to see this content.