As it stands now, Congress is considering a new bill that plans to exempt personal cryptocurrency transactions from being classified as capital gains to be taxed. The bill had previously been introduced but didn’t satisfy Congress enough at the time.
Avoiding IRS Capital Gains Taxation
The bill itself aptly called “The Virtual Currency Tax fairness Act of 2020”, seeks to establish an exemption for users that make use of virtual currencies as a form of payment. As it stands now, cryptocurrencies have a tendency to radically change the value, causing the user to unexpectedly gain a massive boost in financing due to holding the right form of crypto at the right time.
The new bill seeks to find a place of exemption from taxation that would befall someone who trades in crypto for profit, to fall on the unlucky soul who just wanted to buy a new toaster.
Two Times the Charm
David Schweikert (R-AZ) and Suzan DelBene (D-WA) were the two Representatives that introduced this latest bill on the 16th of January. Earlier, in 2017, Schweikert had introduced another version of this same bill. However, that bill was eventually thrown out due to its massive exemption parameters.
Current laws have yet to accurately figure out what to do with cryptocurrencies as a whole since it doesn’t behave like any other form of an asset within its reference. Sometimes, the thing acts like a commodity; other times, it behaves as an investment. On some occasions, it even behaves like a regular currency. The new bill aims to help with the use of crypto as a form of money, to simplify and ease the use of it without fear of IRS reprisals.
Bulky Systems Needing Repair
As it stands now, the IRS is indiscriminately taxing crypto users for gains earned on cryptocurrencies, even those they gain without their knowledge. The entire thing is solely based on the crypto’s value at the time of purchase. As one would imagine, taxation on the current value of whatever digital asset is relevant would severely snag up the entire infrastructure of the IRS.
The new bill allows some breathing room when it comes to what is considered “capital gains” and what is considered “dumb luck.” In this case, taxpayers are exempt from reporting profits that are less than $200. This would generally only apply to things like significant purchases or very extreme bull runs in the trading market. The previous version allowed for $600 in wiggle room.