Bill to Exempt Small Crypto Transactions from Taxes Returns to US Congress
A new bill that exempts small crypto transactions from the capital gains tax is expected to return to Congress for additional deliberations. The bill has been in the works for years and has been pushed through by a Washington-based non-profit dubbed the Coin Center.
Titled the Virtual Currency Tax Fairness Act of 2020, the bill seeks to make the idea of trading digital currencies easier for average traders.
The bill already has bipartisan backing. It was first introduced to Congress by Representative David Schweikert (R-Arizona) and Suzan DelBene (D-WA). Current tax laws in the US have been a huge hindrance to the wide adoption of digital currencies across the United States.
According to directives issued by the IRS in 2014, cryptos are categorized as property. This means that they are liable for capital gains taxes if and when they rise or decrease in value after a transaction.
The guidelines make any crypto transaction, no matter how small it is, a taxable event. This creates huge challenges since all these transactions have to be reported to the IRS. When you consider how volatile the crypto market is, it can be a huge hassle.
The 2014 directive by the IRS was hugely criticized. It was seen as a deliberate attempt by the state agency to prevent the adoption of crypto trading. But the new law seeks to change all these things.
The first thing would be to push the IRS to change its designation of cryptos from property to currencies because that’s exactly what they are. If the bill is passed, taxpayers will be exempted from paying tax and from the duty of reporting any transactions whose capital gains are less than $200. The initial bill which went to Congress had set this limit to $600 but it seems lawmakers are waking up to reason.
Additionally, the bill will seek to classify capital gains for crypto assets as gross income. There are so many people in the digital currency market who feel that these currencies have been unfairly targeted. There is no doubt that cryptos pose risks to the state since they cannot be controlled by government agencies.
But there is a feeling that any kind of regulation on the digital currency shouldn’t curtail their growth. The argument is that digital currencies just like normal fiat currencies have a huge role to play in the economy. Regulations that help to actualize that potential instead of curtailing it is therefore needed.
Coin Center believes that its new bill will be a huge step forward in making cryptocurrencies more acceptable across the board. Widespread adoption of digital currencies still remains a huge challenge due to draconian tax laws like the ones imposed by the IRS.
The nonprofit believes that if such laws are lifted, then it could herald a very crucial time in the growth and wide–scale adoption of cryptos. It could also signal that the US congress is open to additional regulatory changes that may help unleash the full potential of digital currencies in the future.