Despite the Internal Revenue Service (IRS) considering cryptocurrency a taxable item, two U.S. Senators – Pat Toomey (R-PA) and Kyrsten Sinema (D-AZ) – are pushing to make smaller digital transactions tax-free.
Those lawmakers believe the current tax code stands in the way of cryptocurrency’s ability to become part of Americans’ everyday lives. The pair are pushing for a Senate version of the Virtual Currency Tax Fairness Act of 2022, which was a piece of legislation originally introduced in the House earlier this year. The bill would allow any transaction up to $50 or any trade where someone earns less than $50 to be tax exempt.
The IRS first addressed the issue of taxing cryptocurrency in 2014 when it stated that virtual currencies should be treated as property for tax purposes because “it operates like ‘real’ currency.”
“That classification was a major setback for adoption because taxpayers were required to track gains and losses in the value of virtual currency each time it was used, hindering retail adoption,” said Perianne Boring, the founder and CEO of the Chamber of Digital Commerce.
Even now, eight years later and well into cryptocurrency’s wider acceptance, the tax code states that a “taxable event” occurs each and every time someone uses cryptocurrency – no matter whether it’s paying for breakfast with bitcoins or making a couple of dollars on an Ethereum investment.
“While digital currencies have the potential to become an ordinary part of Americans’ everyday lives, our current tax code stands in the way,” said Senator Toomey. “The Virtual Currency Tax Fairness Act will allow Americans to use cryptocurrencies more easily as an everyday method of payment by exempting from taxes small personal transactions like buying a cup of coffee.”
Cryptocurrency experts weigh in
Toomey and Sinema said cryptocurrency experts are already lining up with support. Jerry Brito, the executive director of the Coin Center, said the new cryptocurrency bill would “foster use of crypto for retail payments, subscription services, and microtransactions.”
Brito noted that cryptocurrencies should have the same exemption for small, personal transactions that Americans already have when they use foreign currency. Kristin Smith, Executive Director of the Blockchain Association, agrees with that assessment.
“The use of virtual currencies for retail payments continues to increase in popularity, making it critical for Americans to understand their tax obligations,” Smith said. “By providing an exemption for small everyday purchases, the Virtual Currency Tax Fairness Act eases the burden for consumers and allows for greater use of virtual currencies for more people.”