Crypto is meant to be used as a payment medium, but if the authorities tax every transaction, it will become a chore to maintain the records. However, this problem could be solved as a new bill by two US Senators proposes to exclude crypto transactions below $50 from taxation. It is a step in the right direction and will ensure that paying for coffee, food, or some groceries with crypto won’t be a major headache.
Transaction below $50 to be exempt from taxes if the bill passes
Pat Toomey and Kyrsten Sinema introduced a bill called the “Virtual Currency Tax Fairness Act” which talks about exempting small transactions from taxation. The bill aims to make it easy to use crypto for everyday use. Otherwise, even if someone pays $5 for a cup of coffee, it will have to be tracked. This will just be a barrier to the widespread adoption of crypto. So, transactions under $50 can be categorized under personal and need not be taxed.
The bill also proposes that investors will not need to pay taxes if the gains made on their crypto investment is less than $50. It will be again a positive step if accepted by the authorities. Right now, investors will have to pay taxes to the IRS even if they make a single cent profit from their crypto investment. Considering there are so many coins and most users invest in more than 1 coin. So, tracking every cent of profit while purchasing coffee or groceries is going to be extremely complicated.
Previously proposed bill on taxation
This is not the first time a bill has been introduced to exempt certain transactions or gains from taxes. Earlier, a similar bill was introduced by Pat Toomey and Kyrsten Sinema, where they proposed that gains and personal transactions below $200 be exempt from taxes. However, it seems it was not passed and didn’t turn into law. And therefore, they have proposed this new bill where the gain size has been reduced to a huge extent.
A challenge in exempting transactions below $50 would be to ensure that users don’t cheat the IRS by making multiple transactions below the limit instead of making a large one.
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