Summary:
- A crypto tax bill was introduced in the U.S. Senate.
- The proposal is championed by lawmakers from both the Democratic and Republican parties.
- A de minimis exemption for crypto transactions under $50 forms the core of the bill, per reports.
- The exemption could nullify otherwise mandatory capital gains taxes for such small transactions.
- CoinDesk noted that the proposal could face a long road ahead as Congress might take an extended August recess and crypto laws might not take off until 2023.
- The proposal comes months after President Joe Biden signed an executive order on cryptocurrencies.
- Other jurisdictions like India have opted for a different approach to crypto taxation.
Senators Pat Toomey and Kyrsten Sinema introduced a de minimis crypto tax bill to Congress geared toward providing capital gains tax relief for traders engaging in transactions worth $50 or less.
Room for a higher limit is also included in the proposal as the bill considers inflation and other macro factors. Additionally, crypto-fiat trades do not fall under the purview of this proposal, per reports.
Notably, a similar bill with a limit of $200 has floated in the Senate during the past two hearings. A much broader proposal called the “Omnibus crypto bill” from Senators Lummis and Gillibrand also supports a de minimis structure for taxing crypto.
The so-called Virtual Currency Tax Fairness Act from Senators Toomey and Kyrsten could implement a de minimis exemption for investors when filing their tax reports.
Currently, U.S. tax laws treat cryptocurrencies as an investment vehicle as opposed to a means of payment. Therefore, it’s mandatory for investors to report capital gains made from their crypto holdings.
Crypto users in the U.S. have supposedly asked for clarity regarding the matter although the Internal Revenue Service does not actively police smaller digital asset transactions, per The Block’s report.
While the bill has enjoyed support from a plethora of crypto advocacy entities like the Blockchain Association, the future of the proposal in Congress remains unclear. The U.S. Senate is close to enacting a long recess and experts believe crypto laws could stay on the back burner until after the elections later this year.
Reports also say that Senator Toomey will not rerun for office, although the lawmaker seems intent on pushing the proposal through.
Crypto Tax Regimes In Other Jurisdictions
While U.S. lawmakers seemingly prefer a more friendly approach to crypto taxation, other jurisdictions like India have reportedly adopted rigid structures toward the matter. India introduced a hefty 30% crypto tax.
An additional 1% tax deduction at source (TDS) was implemented as well. Since these laws came into effect in April and July, trading volumes have slumped and exchanges mull over relocating to more accommodating climates.
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