A Bi-Partisan Bill Introduced by two US Senators for Tax-Free Crypto Payments
- The U.S. Senate has received a new measure from Senators Patrick Toomey and Kyrsten Sinema that would exempt modest crypto transactions from the application of capital gains tax regulations.
- With a mechanism to change that baseline along with having inflation, the proposed law would apply to transactions with a value of less than $50.
A bipartisan bill to eliminate low-value bitcoin transactions from capital gains tax reporting requirements has been proposed by two U.S. senators. Senators Patrick Toomey (R-PA) and Krysten Sinema (D-AZ) are introducing the Virtual Currency Tax Fairness Act, which would preclude bitcoin transactions up to $50 from taxes or trades with gains up to $50.
According to Toomey, “our current tax law stands in the way of digital currencies being a commonplace part of Americans’ everyday lives. The Virtual Currency Tax Fairness Act exempts from taxes small, private transactions like buying a cup of coffee, making it easier for Americans to utilize cryptocurrencies as a regular form of payment.
According to Sinema, “We’re safeguarding Arizonans from unexpected taxes on routine digital payments, so Arizonans can retain more of their own money in their pockets and continue to thrive as the use of digital currencies rises.”
Toomey feels that despite the bipartisan effort, our present tax law prevents digital currencies from becoming a regular part of Americans’ daily life.
Senator Toomey is not alone in sharing his viewpoint, as other bills have been proposed in an effort to relax tax regulations for persons wishing to trade in or make small investments in bitcoin and other cryptocurrencies.
The United States Senate Committee on Banking, Housing, and Urban Affairs assert that when a cryptocurrency transaction takes place, it can be considered a taxable event if the value of the digital asset increases as a result of capital-gains-tax regulations. All transactions and gains on personal transactions under $50 would be free from taxation under the proposed legislation.
The IRS currently mandates that if you pay for a Coke with bitcoin at a gas station, you must report the transaction as a completely separate capital gains event. To do this, you must calculate the price you paid for the specific cryptocurrency used — many people buy cryptocurrency repetitively to slowly build holdings — and compare it to the price it was at the time of the purchase. Any rise results in the taxman receiving a share of up to 20%, which is two to three times what you would pay in all but a small number of the priciest U.S. cities.
In simple terms, currently, Internal Revenue Service (IRS) policy implies that the “sale or exchange of convertible virtual currency, or the use of convertible virtual currency to pay for goods or services in a real-world economy transaction, has tax ramifications and may result in a tax liability.”
The Virtual Currency Tax Fairness Act, sponsored by Washington state congresswoman Suzan K. DelBene and proposed earlier this year, intended to exempt earnings from bitcoin transactions of less than $200. The Responsible Financial Innovation Act was introduced by senators Cynthia Lummis (R-WY) and Kirsten Gillibrand (D-NY) in an attempt to also avoid taxes on capital gains up to $200 from bitcoin payments for goods and services.
The legislative attempts to relieve minor crypto transactions from capital gains tax rules have received widespread support from the community and from crypto advocacy groups, but many feel it is unlikely that any legislation will become law by the end of the year. The present legislative calendar, which is full of non-crypto-related concerns, expires before the November midterm elections. Furthermore, Senator Toomey won’t be seeking reelection, so he won’t be around to help push the bill toward its likely passage in the following Congress.