Bitcoin has increased by more than 1,700% in 2017 alone, so it's fair to assume that there are many people who are sitting on some serious profits. Whether you've sold BTC at a profit or are continuing to hold on for the ride, or even if you've paid for things in BTC, you need to know the tax implications of cryptocurrencies, as well as two ways you could potentially reduce your tax bill.The IRS has classified bitcoin, and other cryptocurrencies, as capital assets.