A new piece of bipartisan legislation, called the Virtual Currency Tax Fairness Act, would make small personal crypto transactions exempt from taxation. This would make cryptos like Bitcoin or Ether much more suitable for buying everyday items, like coffee.
The legislation has been introduced by U.S. Senate Banking Committee Ranking Member Pat Toomey, a Republican, and U.S. Senator Kyrsten Sinema, a Democrat. They said under current rules, if crypto increases by just a fraction at the time you use it to buy an item, compared to when you bought it, you’d be liable to pay capital gains tax. Under the new rules, you’d be exempt from this tax if the asset has gained in value under $50 or if you make a personal transaction of under $50.
Commenting on the proposal, Senator Toomey, said:
“While digital currencies have the potential to become an ordinary part of Americans’ everyday lives, our current tax code stands in the way. The Virtual Currency Tax Fairness Act will allow Americans to use cryptocurrencies more easily as an everyday method of payment by exempting from taxes small personal transactions like buying a cup of coffee.”
If the legislation ever becomes law, it could help the adoption of cryptocurrencies. As things stand, crypto taxes can be very complicated to work out due to the constantly changing prices, frequency of transactions, and the changing quantity of crypto a person holds. Unlike other assets that are taxed under capital gains taxes, cryptocurrencies are a lot more liquid and harder to keep a tab of.