Senate Bill Would Cut Taxes on $50 Bitcoin and Crypto Payments
On July 26th, 2022, Senators Patrick Toomey (R-PA) and Kyrsten Sinema (D-AZ) introduced a bill to the U.S. Senate that would exempt Bitcoin and cryptocurrency transactions up to $50 from capital gains taxes.
Reactions from Twitter toward the announcement have varied from supportive to many suggesting methods for performing “incremental” payments in order to avoid declaring transactions larger than $50.
The Internal Revenue Service currently recognizes Bitcoin and other cryptocurrencies as property while transactions are seen as investments rather than payments. This means that every time an American citizen exchanges or sells Bitcoin or cryptocurrency, they must track and pay capital gains taxes for each transaction regardless of size.
The current treatment of Bitcoin and cryptocurrency transactions has significantly hampered the asset class's potential for use in traditional trade. Many detractors and regulators have used this as evidence against the usefulness of Bitcoin and cryptocurrencies.
The recently released bipartisan legislation known as the Virtual Currency Tax Fairness Act, aims to exempt modest Bitcoin and cryptocurrency transactions from the requirement to report capital gains. If passed into law, the bill would be applicable to transactions having a value of less than $50, with a provision to raise or lower that threshold in accordance with inflation. It was not specified which metrics would be used for determining the inflation rate.
It is worthy to note that a similar bipartisan bill, with the same name, was introduced to Congress in February by Representatives Suzan DelBene, David Schweikert, Darren Soto, and Tom Emmer where the threshold benchmark was set at $200 rather than the recently proposed $50.
Additionally, Senators Kirsten Gillibrand and Cynthia Lummis unveiled a comprehensive Bitcoin and cryptocurrency bill in June that included, among other things, a provision to lower taxes on all Bitcoin and cryptocurrency transactions under $200 as well.
The lobbying attempts to exempt modest Bitcoin and crypto transactions from capital gains tax rules have received widespread support from the community and from lobbying groups, but it is unlikely that any legislation will become law by the end of the year.
The current legislative calendar, which is full of non-Bitcoin or crypto-related issues, expires before the November midterm elections. In addition, Senator Toomey will not be seeking reelection, and will not be around to help push the bill to its potential enactment in Congress.