Is cryptocurrency taxable? How is it taxed?

Cryptocurrency is a new medium of exchange that is rapidly growing in popularity.  Before investing in any one of the types of cryptocurrency (bitcoin being the most popular) you should realize that it is not backed by or protected by the United States government or any bank.  It is purely private.  Therefore, there are more risks of scams and thievery.  However, the IRS does have regulations on its taxation.  For tax purposes, cryptocurrency is treated as property and is taxed the same way as real property or stocks are taxed.  Thus, the sale or trade of cryptocurrency results in a capital gain or loss and is taxed accordingly.  However, different rules apply depending on whether the cryptocurrency is held for investment, traded back and forth with others or used to purchase goods and services.  If you begin dealing with bitcoin or other cryptocurrency, you should consult with a tax professional to be sure to report your purchases and sales correctly.