TLDR
The bill introduces a $300 crypto tax exemption for small transactions, adjusting for inflation in 2026.
Tax on crypto mining/staking is delayed until tokens are sold or used, easing cash flow.
Crypto lending will be treated like securities lending, eliminating tax on temporary loans.
The bill tackles wash sales and introduces mark-to-market accounting for more flexible reporting.
U.S. Senator Cynthia Lummis has introduced new legislation aimed at simplifying the taxation of cryptocurrency transactions, including Bitcoin. The bill seeks to ease the tax burden on everyday digital payments, as well as on activities like mining, staking, lending, and charitable donations. By addressing current tax rules that many see as outdated, the bill aims to foster innovation and competitiveness in the growing digital asset sector.
Crypto Tax Exemption for Small Transactions
A key component of the bill is the introduction of a $300 crypto tax exemption. This de minimis exemption would allow small transactions, such as buying coffee or making other everyday purchases with digital assets, without triggering the need for tax reporting.
The exemption will also apply to transactions involving Bitcoin and other digital currencies, making it easier for people to use crypto without worrying about tax complications.
Under the proposed bill, the $300 limit will be adjusted for inflation starting in 2026, which would keep the exemption in line with rising prices. Additionally, the bill introduces a cap of $5,000 on tax-free gains per year. This means that while small transactions are tax-free, there will still be an annual limit on the total amount of crypto gains that can be exempt from tax reporting.
Reforming Crypto Mining and Staking Tax Rules
Currently, cryptocurrency miners and stakers are taxed on their assets as soon as they receive tokens, even if they have not yet sold or used them. The new bill seeks to change this by delaying tax payments until the tokens are actually sold or used.
This change would help miners and stakers avoid tax complications associated with holding assets and could also help with cash flow and tax planning.
Under the current system, crypto miners and stakers face challenges in managing tax obligations, particularly when prices fluctuate rapidly. By allowing tax to be due only upon sale, the bill could reduce the financial strain that many in the mining and staking communities experience. This proposed shift aligns with the approach taken for traditional investments and could offer more predictable tax obligations for those involved in digital asset activities.
Enhancing Crypto Lending and Charitable Giving
Another area of focus for the bill is crypto lending. Currently, cryptocurrency lending activities are subject to tax rules that apply to traditional securities. Under the new bill, crypto lending would be treated in the same way as securities lending, meaning that temporary lending of crypto assets would not trigger tax obligations.
This change is expected to encourage more crypto lending, helping to increase liquidity in the market and providing new opportunities for borrowers and lenders.
The bill also includes provisions aimed at simplifying charitable giving. At present, donating cryptocurrency to charities can be a complicated process, often requiring costly appraisals for the donated assets. The new legislation seeks to remove this requirement for actively traded digital assets, making it easier for individuals to contribute crypto to charitable causes. This change is intended to encourage more people to use their digital assets for philanthropy.
Addressing the Wash Sale Loophole and Introducing Mark-to-Market Accounting
Senator Lummis’ bill also tackles the issue of wash sales in the crypto market. Under existing rules, investors can sell crypto at a loss and quickly repurchase the same asset to lower their taxable income. The bill seeks to apply the 30-day wash sale rule to digital assets, which would prevent this strategy from being used to avoid taxes. This move aims to bring crypto taxation in line with stock market regulations, where the wash sale rule is already applied.
Additionally, the bill introduces an option for mark-to-market accounting. This method allows traders to report the value of their holdings at the end of the year, rather than relying on actual sales. This option would provide greater flexibility in reporting income, especially for those who hold crypto assets for longer periods.
Senator Lummis has made the bill available for public comment, encouraging feedback from all stakeholders. Despite initially seeking to include this proposal in a larger piece of legislation, Lummis has moved forward with introducing the bill independently. The changes in this bill are expected to benefit both individual crypto users and businesses by providing clarity and stability in tax regulations for digital assets.
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