Lawmakers Introduce Bill To Improve Crypto Tax Laws — Here’s How It Would Make Life Easier for Consumers

customer pay drink with bitcoins on tablet screen at cafe counter bar,seller coffee shop accept payment by crypto currency.
Weedezign / Getty Images/iStockphoto

Legislation reintroduced to Congress last week by a bipartisan group of lawmakers aims to change the way cryptocurrency purchases are taxed and help clear up some of the confusion over how to account for certain crypto transactions on your tax returns.

See: Taxes 2022 — Questions About Your Crypto Purchase To Ask an Accountant Before You File
Find: There’s a New Free Service for Compiling Tax Data To Report Crypto and NFTs

The Virtual Currency Tax Fairness Act was introduced on Feb. 3 by Rep. Suzan DelBene (D-Wash.) and Rep. David Schweikert (R-Ariz.) and is co-sponsored by Rep. Darren Soto (D-Fla.) and Rep. Tom Emmer (R-Minn.), Accounting Today reported. The bill would exempt personal transactions made with cryptocurrency when the gains are $200 or less.

Under current tax laws, all gains from virtual currency must be reported as taxable income regardless of the size or purpose of the transaction. Taxpayers are required to calculate and report any changes in the currency’s value against the dollar from the time they bought the currency until it’s used in a transaction, according to Accounting Today.

Building Wealth

Under the proposed legislation, taxpayers would no longer have to worry about the tax implications of smaller transactions — a major benefit, considering the rise of crypto as a consumer currency and the confusion over how crypto is taxed.

See: 4 Best Crypto Exchanges of 2022
Find: How To Keep Your Crypto Investments Safe, According to Experts

“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 news release. “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 … This commonsense bill cuts the red tape and opens the door to further innovations, ultimately growing our digital economy.”

Schweikert, Emmer and Soto co-chair the Congressional Blockchain Caucus, a congressional group that includes 35 lawmakers, Forbes reported. The caucus aims to simplify tax laws involving virtual currency and make it easier for both investors and consumers to use it — something industry officials have been lobbying for as cryptocurrency becomes a bigger part of the financial mainstream.

“While Bitcoin and other cryptocurrencies are technologically innovative payment methods, today you have to keep track of and report every transaction you make using them, whether it’s a $10,000 investment trade or whether you’re buying a 99¢ song online or a latte at a cafe,” Jerry Brito, executive director of cryptocurrency think tank Coin Center, said in a statement. “This obviously creates friction and puts cryptocurrencies at a disadvantage relative to other digital payment methods.”

Building Wealth

See: Ready To Invest In Cryptocurrency? Get Started With Just $1
Find: 8 Cryptocurrency Tax Nightmares and How To Avoid Them

The proposed bill will “create a level playing field” and “help unleash innovation on applications like micropayments, which can consist of dozens of transactions per minute and thus are difficult to square with the current law,” Brito added.

Kristin Smith, executive director of the Blockchain Association, an industry trade group, said new laws are especially important as more consumers make retail purchases with crypto. Among the retailers that now allow Bitcoin payments are Whole Foods, Starbucks, Home Depot, Overstock and Etsy.

“As the use of virtual currencies for retail payments increases, it’s important that Americans are able to easily understand their tax obligations,” Smith said in a statement. “By providing an exemption for small everyday purchases, the Virtual Currency Tax Fairness Act would ease this burden for consumers.”

More From GOBankingRates

About the Author

Vance Cariaga is a London-based writer, editor and journalist who previously held staff positions at Investor’s Business Daily, The Charlotte Business Journal and The Charlotte Observer. His work also appeared in Charlotte Magazine, Street & Smith’s Sports Business Journal and Business North Carolina magazine. He holds a B.A. in English from Appalachian State University and studied journalism at the University of South Carolina. His reporting earned awards from the North Carolina Press Association, the Green Eyeshade Awards and AlterNet. In addition to journalism, he has worked in banking, accounting and restaurant management. A native of North Carolina who also writes fiction, Vance’s short story, “Saint Christopher,” placed second in the 2019 Writer’s Digest Short Short Story Competition. Two of his short stories appear in With One Eye on the Cows, an anthology published by Ad Hoc Fiction in 2019. His debut novel, Voodoo Hideaway, was published in 2021 by Atmosphere Press.

Best Bank Accounts of June 2022

Untitled design (1)
Close popup The GBR Closer icon

Sending you timely financial stories that you can bank on.

Sign up for our daily newsletter for the latest financial news and trending topics.

Loading...
Please enter an email.
Please enter a valid email address.
There was an unknown error. Please try again later.

For our full Privacy Policy, click here.