Cryptocurrency Loans: Are They Loans for Tax Purposes? Expert Blog

When you borrow money, it is not income for tax purposes because you have to pay it back. When you lend money, you get no tax deduction or other taxable event. You just changed your money into a promise that the borrower will pay you back. So, to the IRS not much has happened.

Sure, there may be interest paid or interest received. Plus, if you are relieved of the obligation to pay back a loan, that is income in the amount of the debt forgiven. Mostly, though, loans can be neutral from a tax viewpoint. How about loans in Bitcoin or other digital currency?