Bitcoin vs Bitcoin Cash: Tax Implications Compared (Awaken.tax Guide)
A complete guide to understanding the tax implications of Bitcoin and Bitcoin Cash investments
Executive Summary
The cryptocurrency landscape has evolved dramatically since Bitcoin's inception in 2009, with Bitcoin Cash emerging as one of the most significant offshoots in 2017. While both cryptocurrencies share common DNA, their different paths have created unique tax considerations that every crypto investor needs to understand.
This comprehensive guide examines the tax implications of Bitcoin (BTC) and Bitcoin Cash (BCH), helping you navigate the complex world of cryptocurrency taxation with confidence.
Table of Contents
Understanding Bitcoin and Bitcoin Cash
The Historic 2017 Fork: Tax Implications That Still Matter
Current Market Position and Adoption
Tax Classification: How Governments View BTC vs BCH
Taxable Events: When You Owe the IRS
Mining and Earning Crypto: Income Tax Considerations
Trading Between BTC and BCH: Capital Gains Complexities
Record Keeping Requirements
International Tax Considerations
Using Awaken.tax for Comprehensive Tracking
Common Tax Mistakes to Avoid
Planning Strategies for 2025 and Beyond
1. Understanding Bitcoin and Bitcoin Cash
Bitcoin (BTC): Digital Gold
Bitcoin, created by the mysterious Satoshi Nakamoto, was designed as a peer-to-peer electronic cash system. However, over its 15+ year history, Bitcoin has evolved into something different—a digital store of value often called "digital gold."
Key characteristics of Bitcoin:
Limited supply
Capped at 21 million coins
Block size
1MB, leading to higher fees during congestion
Transaction speed
Approximately 7 transactions per second
Primary use case
Store of value and institutional treasury asset
Market dominance
Consistently holds 40-60% of total crypto market cap
Bitcoin Cash (BCH): Digital Cash
Bitcoin Cash emerged from Bitcoin's scalability debates. When the Bitcoin community couldn't agree on how to scale the network, a hard fork occurred on August 1, 2017, creating Bitcoin Cash.
Key characteristics of Bitcoin Cash:
Larger blocks
Initially 8MB, now up to 32MB
Lower fees
Typically under $0.01 per transaction
Faster confirmation
More transactions per block
Primary use case
Peer-to-peer digital cash for everyday transactions
Market position
Usually ranks in the top 20 cryptocurrencies by market cap
2. The Historic 2017 Fork: Tax Implications That Still Matter
The Bitcoin Cash fork remains one of the most significant tax events in cryptocurrency history. If you held Bitcoin on August 1, 2017, you automatically received an equal amount of Bitcoin Cash—and this created immediate tax consequences.
Tax Treatment of the Fork
In the United States and most jurisdictions, receiving Bitcoin Cash was treated as ordinary income. Here's what that meant:
Income Recognition
The fair market value of BCH at the time you gained access to it became taxable income
Cost Basis
That same value became your cost basis for future BCH transactions
Tax Rates
Fork income was subject to ordinary income tax rates, not capital gains rates
Example Scenario
Let's say you owned 10 Bitcoin on August 1, 2017:
You automatically received 10 Bitcoin Cash
BCH was trading at approximately $400 when widely accessible
You had to report $4,000 (10 × $400) as ordinary income
Your cost basis in those 10 BCH became $4,000
This created an immediate tax liability even if you never sold or touched your Bitcoin Cash—a surprise that caught many investors off guard.
3. Current Market Position and Adoption
Bitcoin's Evolution
Bitcoin has solidified its position as the premier cryptocurrency:
Market cap
Consistently over $500 billion
Institutional adoption
Companies like MicroStrategy, Tesla, and El Salvador hold BTC as treasury assets
ETF approval
Bitcoin ETFs launched in 2024, bringing institutional investment
Use case
Primarily used as a store of value rather than daily transactions
Bitcoin Cash's Journey
Bitcoin Cash has maintained its focus on payments:
Market cap
Typically ranges from $5-20 billion
Merchant adoption
Accepted by thousands of merchants worldwide
Transaction volume
Consistently handles daily transactions efficiently
Use case
Remains focused on peer-to-peer electronic cash
For a deeper dive into how Q4 patterns and these dynamics converge to shape a bullish outlook, check out our detailed Bitcoin Q4 Outlook for 2025 analysis.
4. Tax Classification: How Governments View BTC vs BCH
Both Bitcoin and Bitcoin Cash are classified as property by the IRS, not currency. This classification has several important implications:
Property Classification Means:
Capital gains treatment
Profits from sales are subject to capital gains tax
Basis tracking
You must track the cost basis of each unit
Like-kind exchanges
Swapping BTC for BCH is taxable (no like-kind treatment post-2017)
Fair market value
All transactions are valued at fair market value in USD
Tax Rates Applied:
Short-term capital gains
Ordinary income rates (up to 37% federally)
Long-term capital gains
Preferential rates (0%, 15%, or 20% depending on income)
Income events
Ordinary income rates apply to mining, forks, and airdrops
You can review the full IRS guidance on per-wallet accounting under Rev. Proc. 2024-28 to see how U.S. regulations are adapting to crypto-specific complexities.
5. Taxable Events: When You Owe the IRS
Understanding when cryptocurrency transactions create tax obligations is crucial for compliance:
Disposal Events (Capital Gains/Losses)
Selling for fiat currency
Selling BTC or BCH for USD, EUR, etc.
Gain/loss = Sale proceeds minus cost basis
Trading crypto-to-crypto
Swapping BTC for BCH or any other cryptocurrency
Each side of the trade creates a taxable event
Spending on goods and services
Using BTC or BCH to buy coffee, cars, or anything else
Treated as if you sold the crypto for cash first
Converting to stablecoins
Trading BTC/BCH for USDC, USDT, etc.
Creates taxable gain or loss
For a step-by-step walkthrough of reporting disposals, swaps, and mining rewards this year, see our guide on how to do your Bitcoin taxes in 2025.
Income Events (Ordinary Income)
Mining rewards
Fair market value at time of receipt
Additional capital gains when eventually sold
Hard fork receipts
Like the BCH fork from BTC
Income equal to fair market value when accessible
Airdrops and promotional distributions
Usually income at fair market value received
Staking rewards (less common for BTC/BCH but relevant for some derivatives)
6. Mining and Earning Crypto: Income Tax Considerations
Bitcoin Mining Tax Treatment
Bitcoin mining creates immediate tax obligations:
Income recognition
Fair market value of BTC received
Business vs. hobby
Affects deduction availability
Self-employment tax
May apply if considered business activity
Deductible Mining Expenses:
Electricity costs
Mining equipment (depreciated over time)
Internet and facility costs
Pool fees
Bitcoin Cash Mining
BCH mining follows similar rules but with some practical differences:
Generally lower mining difficulty
Different reward structure
Same tax treatment as BTC mining
Example Mining Tax Calculation:
If you mine 0.1 BTC worth $6,000 today:
Immediate income: $6,000
Cost basis for future sales: $6,000
If sold later for $7,000: $1,000 capital gain
7. Trading Between BTC and BCH: Capital Gains Complexities
Many investors trade between Bitcoin and Bitcoin Cash, creating multiple taxable events:
Same-Day Trading Example:
Buy 1 BTC for $60,000
BTC rises to $62,000
Trade 1 BTC for 200 BCH (worth $62,000)
Taxable gain: $2,000 short-term capital gain
BCH cost basis: $62,000 (or $310 per BCH)
Tax Optimization Strategies:
Tax-loss harvesting
Realize losses to offset gains
Long-term holding
Hold over one year for preferential rates
Timing realization
Consider tax year impacts
(Different strategies can shape both your gains and your tax bill — we break them down in our article on crypto strategies)
8. Record Keeping Requirements
The IRS expects detailed records of all cryptocurrency transactions:
Essential Records to Maintain:
Transaction dates and times
Fair market values in USD
Cost basis information
Transaction purposes
Wallet addresses involved
Exchange records and confirmations
Documentation Best Practices:
Export exchange transaction histories
Screenshot wallet transactions
Save confirmation emails
Maintain spreadsheets or use tax software
Keep records for at least 7 years
9. International Tax Considerations
Tax treatment varies significantly by country:
United Kingdom:
Capital Gains Tax
Applies to crypto disposals
Annual exempt amount
£6,000 for 2024/25
Income tax
Applies to mining and business activities
Canada:
Business vs. investment
Determines tax treatment
50% inclusion rate
For capital gains
Full taxation
For business income
Australia:
CGT events
Apply to crypto disposals
50% discount
For assets held over 12 months
Personal use exemption
For transactions under AUD $10,000
European Union:
Varies by member state
Generally treats crypto as property
Some countries have specific crypto tax regimes
If you’re dealing with cross-border cases or planning to move, check out our detailed crypto tax guide for Russia in 2025 to see how they differ from U.S. norms.
10. Using Awaken for Comprehensive Tracking
Managing Bitcoin and Bitcoin Cash taxes manually can be overwhelming. Awaken provides automated solutions:
Key Features for BTC/BCH Tracking:
Automatic import
Connects to major exchanges and wallets
Fork handling
Properly accounts for the BCH fork and others
Cost basis tracking
Uses appropriate accounting methods (FIFO, LIFO, etc.)
Tax form generation
Creates necessary tax forms and schedules
Multi-jurisdiction support
Handles different country requirements
How Awaken Handles Complex Scenarios:
Fork events
Automatically identifies and properly categorizes fork receipts
Cross-exchange tracking
Follows tokens across multiple platforms
DeFi integration
Tracks complex DeFi protocols involving BTC/BCH
Real-time calculations
Provides up-to-date tax liability estimates
Benefits Over Manual Tracking:
Time savings
Reduces hours of manual work to minutes
Accuracy
Eliminates human calculation errors
Compliance
Ensures proper tax treatment following current regulations
Audit support
Provides detailed reports for tax professionals
If you’re wondering why it stands out compared to other platforms, check out our in-depth guide on why Awaken is the best crypto tax software.
11. Common Tax Mistakes to Avoid
Mistake 1: Ignoring the BCH Fork
Many Bitcoin holders never reported their Bitcoin Cash fork income, creating potential audit issues.
Mistake 2: Not Tracking Cost Basis
Failing to maintain proper cost basis records makes tax compliance impossible and often results in overpaying taxes.
Mistake 3: Treating Crypto-to-Crypto as Non-Taxable
Every crypto swap creates a taxable event—there are no like-kind exchanges for crypto.
Mistake 4: Using Incorrect Fair Market Values
Using prices from just one exchange can lead to inaccurate reporting. Use reputable pricing sources.
Mistake 5: Not Reporting Mining Income
All mining rewards must be reported as income at fair market value.
Mistake 6: Mixing Personal and Business Use
Clearly separate personal investment activities from business or mining activities.
To deepen your understanding, read our full guide on common crypto tax mistakes to avoid.
12. Planning Strategies for 2025 and Beyond
Tax-Efficient Strategies:
Long-term holding: Hold assets over one year for preferential capital gains rates
Tax-loss harvesting: Strategically realize losses to offset gains
Retirement accounts: Consider Bitcoin ETFs in tax-advantaged accounts
Geographic optimization: Understand tax implications if relocating
Estate planning: Plan for crypto inheritance and gift tax implications
Emerging Considerations:
Lightning Network
Tax treatment of Lightning transactions
Bitcoin ETFs
Simplifying tax reporting through traditional investment vehicles
Regulatory changes
Stay informed about evolving crypto tax regulations
International reporting
FBAR and other international reporting requirements
For deeper insight into how larger entities are navigating crypto adoption and tax compliance strategies in 2025, check out our analysis on enterprise adoption and tax management in 2025.
Conclusion
Bitcoin and Bitcoin Cash, despite their shared origins, present distinct tax challenges and opportunities. The 2017 fork created lasting tax implications that continue to affect holders today, while ongoing transactions in both cryptocurrencies generate regular tax obligations.
Success in crypto taxation requires understanding the rules, maintaining detailed records, and using appropriate tools for tracking and reporting. Whether you're a long-term holder, active trader, or miner, proper tax planning can save you significant money and help avoid costly compliance issues.
Awaken provides the sophisticated tracking and reporting tools necessary to manage Bitcoin and Bitcoin Cash taxation effectively. By automating the complex calculations and maintaining detailed records, you can focus on your investment strategy while ensuring full tax compliance.
As the cryptocurrency space continues evolving, staying informed about tax implications and using professional-grade tools becomes increasingly important. The investment in proper tax planning today can pay dividends in reduced tax liability and audit protection for years to come.
About Awaken
Awaken is a leading cryptocurrency tax software designed to simplify crypto tax compliance for individuals, businesses, and tax professionals. Our platform automatically imports transactions from hundreds of exchanges and wallets, calculates accurate tax liabilities, and generates the necessary tax forms for filing.
Contact Information:
Website: awaken.tax
Support: Available through our platform
Documentation: Comprehensive guides and resources available online
Legal Disclaimer: This document is for informational purposes only and does not constitute tax, financial, or legal advice. Tax laws are complex and vary by jurisdiction. Always consult with a qualified tax professional regarding your specific situation. Awaken provides tools to simplify crypto tax reporting but does not replace professional tax advice.
