Bipartisan Bill Seeks to Eliminate Taxes on Crypto Transactions

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In July, the Senate introduced a bill that would exempt Americans from disclosing capital gains or losses on most smaller-scale cryptocurrency transactions.

With widespread support from the cryptocurrency community, the Virtual Currency Tax Fairness Act would make it easier to use digital assets in everyday transactions by establishing a reasonable de minimis exemption for personal gains of less than $50 and individual transactions under $50.

A taxable event occurs every time a digital asset is used under current law.

For example, suppose a person uses digital assets to buy a cup of coffee. In that case, the person will owe capital gains on the transaction if the digital asset appreciates—even if the investment only increases in value by a fraction of a penny.

The bill also includes an aggregation rule that treats all sales or exchanges that are part of the same transaction as ONE sale or exchange. This rule should prevent bad actors from abusing the exemption to avoid paying taxes on more significant transactions.

The Cryptocurrency Tax Fairness Act, introduced by Senators Patrick Toomey (R-PA) and Kyrsten Sinema (D-AZ), would exempt reporting cryptocurrency transactions of less than $50 or trades in which a person earns less than $50.

Similar legislation is currently being considered in Congress. Senators Cynthia Lummis (R-WY) and Kirsten Gillibrand (D-NY) introduced the Responsible Financial Innovation Act, which would eliminate the requirement to report cryptocurrency gains of $200 or less to the Internal Revenue Service (IRS).

According to current IRS regulations, even the most minor cryptocurrency transactions can result in a capital gains event:

“When you sell virtual currency, you must recognize any capital gain or loss on the sale, subject to any limitations on the deductibility of capital losses.”

The bill was introduced in July as a companion piece to the Virtual Currency Tax Fairness Act, which was reintroduced earlier this year in the House of Representatives and specified a “de minimis” capital gains exemption on crypto transactions with realized gains of less than $200.

According to Suzan DelBene (D-WA), who introduced the bill with David Schweikert (R-AZ), said the bipartisan bill would revamp the IRS Code of 1986 to include cryptocurrency.

She continued to add that it would also lay the groundwork for a growing digital economy and increase the use of cryptocurrencies in everyday life.

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