Author Topic: BitCoin Master Thread  (Read 13318 times)

Online churnbabychurn

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Re: Whats the story with BitCoins ?
« Reply #75 on: December 04, 2013, 01:23:09 AM »
That article sounds fishy. Thousands of small donations I would believe. But 22 $1,100 donations?
His account definitely did go up to 22 btc...
There are plenty of btc millionaires who would do anything to gain publicity and pump it up though.

ETA this confirms. It stinks
http://m.goingconcern.com/post/espn-bitcoin-sign-guy-raises-over-22k-now-needs-tax-advice

« Last Edit: December 04, 2013, 01:34:04 AM by churnbabychurn »

Online henche

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Re: Whats the story with BitCoins ?
« Reply #76 on: December 04, 2013, 08:52:44 AM »
He doesnt need tax advice. (And this certainly is not advice). The result is obvious.

(Also, theres no such thing as being shoved into a higher bracket and being worse off)

Online churnbabychurn

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Re: Whats the story with BitCoins ?
« Reply #77 on: December 04, 2013, 09:10:41 AM »

(Also, theres no such thing as being shoved into a higher bracket and being worse off)
-1 maybe not from a gift...

Online henche

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Re: Whats the story with BitCoins ?
« Reply #78 on: December 04, 2013, 09:15:54 AM »
-1 maybe not from a gift...

-1, there still is no such thing

Offline MarkS

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Re: Whats the story with BitCoins ?
« Reply #79 on: December 04, 2013, 09:26:00 AM »
There is a common misconception that if you go into a higher bracket, all of your income is taxed at that bracket and therefore it's better to be just under a threshold than just above.
In reality, the tax brackets are tiered so you pay 10% on anything up to $17,400, 15% on anything from $17,401 to $70,700, 25% on anything from $70,701 to $142,700 etc.

Even a millionaire only pays 10% on his first $17K and 15% on the next $53K.

The only times you can lose out by making more is with certain credits like the Earned Income Credit and the Obamacare credits.

Online henche

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Re: Whats the story with BitCoins ?
« Reply #80 on: December 04, 2013, 09:29:04 AM »
There is a common misconception that if you go into a higher bracket, all of your income is taxed at that bracket and therefore it's better to be just under a threshold than just above.
In reality, the tax brackets are tiered so you pay 10% on anything up to $17,400, 15% on anything from $17,401 to $70,700, 25% on anything from $70,701 to $142,700 etc.

Even a millionaire only pays 10% on his first $17K and 15% on the next $53K.

The only times you can lose out by making more is with certain credits like the Earned Income Credit and the Obamacare credits.

+1

More accurately, even with EITC you cannot lose out. You can only lose out when it affects other benefits such as medicaid, foodstamps, etc. And in our community, tuition.

Online churnbabychurn

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Re: Whats the story with BitCoins ?
« Reply #81 on: December 04, 2013, 09:44:48 AM »
+1

More accurately, even with EITC you cannot lose out. You can only lose out when it affects other benefits such as medicaid, foodstamps, etc. And in our community, tuition.
Waddaya mean, dont you lose the credit when you go over the limit?

Online henche

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Re: Whats the story with BitCoins ?
« Reply #82 on: December 04, 2013, 09:57:06 AM »
Waddaya mean, dont you lose the credit when you go over the limit?

It phases out. The graph looks something like this:


Online churnbabychurn

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Re: Whats the story with BitCoins ?
« Reply #83 on: December 04, 2013, 10:22:31 AM »
It phases out. The graph looks something like this:
Thats my point ???

Online henche

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Re: Whats the story with BitCoins ?
« Reply #84 on: December 04, 2013, 10:38:16 AM »
So you can see that it phases out gradually. It works out that your marginal rate in the phaseout range is quite high, but at no time is it higher than 100%.

Let me try and find a graph for that.

ETA: Here's what I have. Let me explain a bit:

Effective Tax Rate: Add up all your money and divide by the amount of tax you pay. This is the number you look at and yell at the darned liberals for stealing your money.
 
Marginal Tax Rate: The % tax you would pay on the next dollar you earned. This is the important number in determining how worth it it is for you to earn.

Here's a chart of how tax brackets work:


But then there is also the EITC, which gives you a payment based on the amount you earn at lower incomes, so you have to subtract this EITC payment from your Marginal rate.



As you see, it phases out. So when you earn more money at that point, not only are you paying tax on that extra money, but it reduces your EITC payment, so you get hit twice! When you add it all up, it looks like this:



Note that the marginal rate starts at negative, since you get back money from the govt in the form of EITC. It goes up to 40% at the EITC phaseout, and then drops back to 10%, before rising again. But, for you to actually lose money by making more money, you'd need to have a Marginal Rate of over 100%, which never happens, because the tax lawyers who write this stuff don't want that to happen.

The bizarre part of this, is that you do have a Marginal Rate of 40%, and you are also losing other benefits like Food Stamps, so it is rarely worth it to take a small promotion and earn a few more bucks in that range. You should only advance if you can make a real jump.
« Last Edit: December 04, 2013, 10:53:51 AM by henche »

Online churnbabychurn

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Re: Whats the story with BitCoins ?
« Reply #85 on: December 04, 2013, 10:49:29 AM »
So you can see that it phases out gradually. It works out that your marginal rate in the phaseout range is quite high, but at no time is it higher than 100%.

Let me try and find a graph for that.
Im not a lawyer so I dont speak your language.

"You make more than 50k you dont get the EIC" That right?

Online henche

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Re: Whats the story with BitCoins ?
« Reply #86 on: December 04, 2013, 10:54:20 AM »
Im not a lawyer so I dont speak your language.

"You make more than 50k you dont get the EIC" That right?
See above.

To answer that specifically: Yes, but you also made more money.
« Last Edit: December 04, 2013, 10:57:47 AM by henche »

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Re: Whats the story with BitCoins ?
« Reply #87 on: December 04, 2013, 11:20:13 AM »
If you shift to a higher bracket you will be taxed on the LT cap gains when selling the btc at a large gain.
True or false?  ;)

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Re: Whats the story with BitCoins ?
« Reply #88 on: December 04, 2013, 11:26:05 AM »
If you shift to a higher bracket you will be taxed on the LT cap gains when selling the btc at a large gain.
True or false?  ;)

Yes. But you still can't have higher than 100% Marginal Rate. I going to a meeting, but I'll be back with the math at some point.

Long Term KG has a funny bracket, where it is calculated separately from other income, but then applies its own brackets. It is 0% if you make less than like 37k, and then 15% on income in excess of 37k (and then 20% higher up the line but lets ignore that for now).

Some examples:
Ordinary income: 10k; KG 10k= no tax on the KG.
Ordinary income: 30k; KG 10k= 15% tax on the 3k that is above 37k.
Ordinary income: 50k; KG 10k= 15% tax on all 10k of KG.

So in your example you wanted to know how making more ordinary income will affect what you pay on the KG. As you can see, it will kick you into paying 15% on that KG, but certainly nothing over 100%.

If you meant to ask about the capital gains a dude like this will have when he sells the bitcoin, I don't know why you assume bitcoin generates capital gains tax at all, but if it does, gifts have a carryover basis from the donor so his basis I guess would be whatever theirs was (no way he'll know what their basis was, no idea what he'll do, I suppose that is a complication)

« Last Edit: December 04, 2013, 12:18:46 PM by henche »

Offline YankyDoodle

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Re: Whats the story with BitCoins ?
« Reply #89 on: December 04, 2013, 12:04:59 PM »
That article sounds fishy. Thousands of small donations I would believe. But 22 $1,100 donations?
The article mentioned that there were about 100 donation amounting to 22 bitcoins. Only an average of ~$300 each.