Bill Will Allow to Exempt Small Crypto Transactions from Taxes in the US
The bill would establish an exemption for virtual currency expenditures that qualify as personal transactions.
Although taxation for capital gains takes place in the United States of America, a new bill seeks to exempt personal or small cryptocurrency transactions from the obligation to pay taxes if the calculated gain in question is less than $200. Taxpayers would have to report their gains if these are over $600. This bill has been introduced again in the Congress of the United States for its evaluation.
The idea is not to affect day-to-day cryptocurrency purchases. The name of this bill is Virtual Currency Tax Fairness Act of 2020 and was published recently by Washington, D.C.-based crypto advocacy group Coin Center.
This bill was introduced by Congresswoman Suzan Delbene (Washington) and Congressman David Schweikert of Arizona on January 16th. Schweikert introduced a previous version of this bill in 2017 that featured a substantially larger exemption.
About the Bill
If said bill is approved, users will not have to report when they spent cryptocurrencies, whose value had changed relative to the US dollar on day-to-day expenses, to the authorities.
Some current crypto laws are not very clear because of the behavior of some cryptocurrencies. Sometimes these assets behave as investments, commodities, and like other currencies. It is for this reason that the new bill seeks to simplify the rules for crypto traders and users.
The bill addresses an issue that arose from the IRS’s determination in 2014 that Bitcoin and other cryptocurrencies constitute a form of property so transactions both big and small trigger a taxable event that leaves prayers on the hook for capital gains.
Currently, the IRS could hold crypto users responsible for paying taxes on gains earned and realized unknowingly, based solely on the value of their crypto at a time of purchase. A system like that would make use of crypto as currency incredibly cumbersome within the US, the community consider.
Those who criticize these affairs say that it impedes the use of cryptocurrencies as a form of payment due to the tax burden involved.
“Gross income of an individual shall not include gain because of changes in exchange rates, from the disposition of virtual currency in a personal transaction, as it is defined in section 11 988 (e). The preceding sentence shall not apply if the gain which would otherwise be recognized on the transaction exceeds $200”, the bill explains.
The project of law would insert a new category within existing IRS exclusions from classification as gross income.
Other Issues with US Taxation
Taxing cryptocurrencies has proved a major sticking point in the US. Last December, eight congresspeople sent a letter to the IRS asking the tax agency to clarify rules for reporting income due to hard forks.
Last year, before the tax reporting deadline which took place on April 21st, representatives sent a similar letter to the IRS, likewise dissatisfied with current clarity.
The crypto community waits for the evaluation of the new bill that would intend to benefit those who execute small transactions.
By María Rodríguez