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US Congress Introduces Virtual Currency Tax Fairness Act

US Congress Introduces Virtual Currency Tax Fairness Act
US Congress Introduces Virtual Currency Tax Fairness Act

The US Congress is trying yet again to make small payments via cryptocurrency a reality. A new bill introduced this week could be one of the biggest steps in this direction.

A new bill in Congress

On Thursday, Arizona Congressman David Schweikert and Washington Congresswoman Suzan Delbene introduced a new bill called “Virtual Currency Tax Fairness Act of 2020.” The bill received bipartisan support, as reported by Coin Center, a crypto advocacy group. The bill proposed an amendment to the Internal Revenue Code of 1986. If it is successful, gross income from crypto gains will be excluded from capital gains tax if the coins are used to make personal purchases. This would be applicable to all gains below $200.

US Congress Introduces Virtual Currency Tax Fairness Act

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.”

A new beginning

Crypto gains are taxed like stocks in the US, which means that investors have to pay short-term or long-term capital gains tax on their crypto holdings if they make any gains on it. The bill seeks to differentiate the use of cryptocurrency as money from the use of cryptocurrency as an investment. If it is passed, it will remove regulatory barriers that don’t allow users to buy pizza or coffee with digital currencies. It will be implemented on all small transactions including personal purchases made after December 31, 2019.

Congressman Schweikert presented a previous version of this bill in 2017 that came with larger exemptions of $600. With smaller limits of $200, retail crypto investors will be exempt from reporting their gains to the authorities, and paying capital gains taxes on their crypto coins if they spend it on purchases. Gains higher than $200 will likely be connected to strong bull runs or with large purchases, which will invoke existing tax laws.

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