U.S. Lawmakers Propose A Bill to Exempt Tax On Small Crypto Transactions
U.S. lawmakers have recently reintroduced a bill which seeks to exempt cryptocurrency transactions from being taxed for capital gains.
Dubbed as “The Virtual Currency Tax Fairness Act of 2020,” the bill seeks exemptions for all the cryptocurrency expenditures that can be treated as personal transactions. This bill seeks to prevents users from reporting instances of spending their crypto holdings whose value continues to fluctuate on a day-to-day basis.
The bill further notes that an amendment to the IRS tax will expect all the realized gains under $200, which will be the then minimum threshold. The bill states:
“Gross income of an individual shall not include gain, by reason of changes in exchange rates, from the disposition of virtual currency in a personal transaction (as such term is defined in section 988(e)). The preceding sentence shall not apply if the gain which would otherwise be recognized on the transaction exceeds $200.”
The existing taxation rules are based on a 2014 Internal Revenue Service guidance which considers Bitcoin and other digital currencies as taxable commodities. This legislation won’t alter any bureaucratic determination, however, it aims to give relief to low-level crypto use-cases like transactions done by crypto users and investors.
Representatives Suzan DelBene (D-WA) and David Schweikert (R-AZ) introduced the bill on Thursday, January 16. If the bill is approved, it will include all crypto transactions taking place after December 31, 2019.
Neeraj Agrawal, director of communications for Coin Center, helped the two Congressmen for lobbying for this bill. "Extending this sensible exemption to cryptocurrency would allow users to do simple things like send small transactions to each other or fractions of pennies to dapps without having to deal with a fairly complicated capital gains calculation every time,” he said.
Cryptocurrency taxation has been a matter of debate in the U.S. and across the globe over the last few years. There’s been a long going debate whether they should be treated as currencies or commodities.
Recently, the South Korean government announced that it will exempt digital currencies from country’s capital gains tax structure. However, this is subject to revision in the future.