Elon Musk announced earlier this week that US customers can now purchase Tesla (TSLA) vehicles using bitcoin. International customers will be able to buy Teslas with the cryptocurrency later in 2021, Musk said.
Last month, the electric car company shared that it had purchased $1.5 billion worth of bitcoin and that it planned to begin accepting the cryptocurrency as payment. The system for customers to do this is now officially in place.
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Related: 2021 guide: How to bitcoin arbitrage
Tesla Will Not Convert Bitcoin to Dollars
Tesla’s decisions, and other contributing factors, have caused the price of bitcoin to hit record highs in recent weeks. Though it continues to be volatile, the price of the cryptocurrency passed the $60,000 mark earlier this month.
Tesla says that when customers buy cars with bitcoin, it plans to hold the digital currency instead of converting it to dollars. It will handle cryptocurrency transactions internally. Essentially, Tesla will turn one-time payments into assets with changing value.
Many cryptocurrency enthusiasts have cheered Tesla’s moves to embrace Bitcoin.
But others are critical of the company’s investments in Bitcoin because of the cryptocurrency’s environmental impact. Tesla builds sustainable vehicles, but Bitcoin is not currently an environmentally sustainable form of conducting transactions. The annual carbon emissions from the electricity that goes into mining Bitcoin and processing transactions is equal to the carbon emissions of all of New Zealand. Tesla’s moves into Bitcoin seem at odds with its goal of making vehicles more sustainable.
One thing to keep in mind, should you choose to use Bitcoin for a Tesla purchase, is the potential tax liability. The IRS views Bitcoin and other cryptocurrencies as property, so when you sell it or exchange it for a product, taxes have to be paid on any appreciation in value from when it was purchased.
If you’ve owned your cryptocurrency for less than 12 months, you’ll pay short-term capital gains rates, which are the same as your normal income tax rate. If you’ve owned it for more than a year, you’ll pay long-term capital gains rates, which vary from 0% to 20% depending on your income.
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Featured Image Credit: Tesla Model S by Guillaume Vachey (CC BY).