The taxation of crypto assets may well be hindering their adoption in the United States. Deemed a commodity by the CFTC and property by the IRS, each time an individual makes a purchase with a digital currency, they are almost certainly creating a taxable event.
Striving for more practical taxation regulations for crypto assets is Washington-based Coin Center. The non-profit worked with members of Congress to introduce a bill that, if passed, would allow low value transactions to be tax exempt.
US Tax Law Makes Actually Using Crypto Tough…
Since cryptocurrency is deemed both a commodity by the Commodity Futures Trading Commission and property by the IRS, spending any amount of crypto is currently considered a taxable event. For anyone actually wanting to spend cryptocurrency, this creates a serious headache come tax season.
The IRS published guidance relating to cryptocurrencies in 2014. It stated that Bitcoin and other digital assets were to be treated as property and, therefore, would incur capital gains when bought or sold. This includes when making seemingly trivial purchases.
Since the prices of leading digital currencies tend to bounce around a lot, the sheer amount of reporting that would be required by anyone attempting to use them for day to day spending is a serious turn off. Of course, this is not the only barrier to serious adoption of the decentralised currencies, but it certainly doesn’t help.
The Virtual Currency Tax Fairness Act of 2020 aims to address that. The legislation has been introduced to US Congress today by Representatives of both parties. The measure seeks to make making low value crypto transactions much simpler.
Congress takes a step toward a de minimis exemption for everyday cryptocurrency transactions https://t.co/3tQ5oIrnqL
The new act was introduced by Representatives DelBene, Schweikert, Soto, and Emmer. It would allow for cryptocurrency transactions to be tax exempt for smaller value purchases. It would work just as a foreign currency de minimis exemption does. That is to say, individuals would not need to report transactions creating a gain or loss of less than $200.
Washington-based crypto research group Coin Center has been working for years now towards a feasible solution to the clear barrier to cryptocurrency adoption. In a report the non-profit explains how it has collaborated with Reps. DelBene and Schweikert to bring the idea back the lawmakers’ attentions.
The researchers write:
“This easy solution to an obvious problem with today’s tax treatment of cryptocurrencies would help level the playing field for this technology.”
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