Blogs & Articles: Bipartisan Bill to Eliminate Taxes for Small Bitcoin Transactions 🔗 2 years ago

The proposed legislation seeks to reduce friction in the usage of bitcoin as a daily currency.

A bipartisan bill introduced Thursday would exempt bitcoin transactions from tax obligations if the associated capital gains are $200 or less, seeking to incentivize the digital currency’s usage as a medium of exchange in the U.S. economy. Currently, any gain obtained from the sale of cryptocurrency must be reported as a taxable income regardless of the size or purpose of the transaction.

“Antiquated regulations around virtual currency do not take into account its potential for use in our daily lives, instead treating it more like a stock or ETF,” said Rep. Suzan DelBene, co-author of the bill, in a statement sent to Bitcoin Magazine. “However, virtual currency has evolved rapidly in the past few years with more opportunities to use it in our everyday lives. This commonsense bill cuts the red tape and opens the door to further innovations, ultimately growing our digital economy.”

The Virtual Currency Tax Fairness Act was co-authored by Rep. David Schweikert and co-sponsored by Representatives Darren Soto and Tom Emmer.

“Virtual currency is reshaping our everyday lives, and the United States needs to recognize this and work to treat these currencies fairly in our tax code,” Schweikert said in a statement. “This legislation is an important step forward, and it lays the groundwork for growing the digital economy.”

Using bitcoin as a payment method entails a sale for the Internal Revenue Service (IRS) as the payer disposes of part of its BTC holdings in exchange for a good or service. If the funds being spent had been acquired at a lower U.S. dollar price, the difference would be characterized as capital gains, of which reporting and taxing would be required.

The legislation seeks to amend the Internal Revenue Code of 1986 to remove these requirements when the capital gain observed doesn’t exceed $200, hence specifically targeting smaller transactions in a push to incentivize, or at least better enable, usage of bitcoin as a means of payment in the U.S.