Unpacking the Virtual Currency Tax Fairness Act: A Bipartisan Move to Ease Crypto Transactions

Understanding the Virtual Currency Tax Fairness Act

The Virtual Currency Tax Fairness Act of 2022, recently introduced by Senators Patrick Toomey and Kyrsten Sinema, aims to tweak the current tax narrative surrounding cryptocurrency by proposing an exclusion for small purchases from capital gains taxes. Currently, every time you buy your morning coffee with crypto, you’re technically entering a high-stakes game of tax calculations.

Current Tax Regulations: A Quick Overview

As it stands, the IRS dictates that any use of cryptocurrency is a taxable event. This means that if the value of your Bitcoin skyrockets from the day you bought it to the moment you decide to treat yourself to that avocado toast, you have to report the gain. The capital gains tax can vary significantly, ringing in anywhere from 0% to 20%, making that breakfast a lot more complicated than it needs to be.

What Happens Now?

• Small purchases made with cryptocurrency lead to a headache of tax calculation.
• The new legislation aims to change this for minor transactions.
• Current law does not take into account the usability of cryptocurrency in everyday purchases.

Bipartisan Support: Who’s in Favor?

Senators Toomey and Sinema are not just crossing party lines; they’re pulling the community together for a cause that champions the potential of cryptocurrency. Toomey, known for his long support of digital currency, stated that the bill’s goal is to make crypto a legitimate form of payment. While both Senators have a common aim, their bill differs in a significant way: size matters!

Details of the Proposed Exemptions

The House version of the bill allows for exemptions on transactions up to $200, while the Senate version sets that limit at $50. This discrepancy could lead to a heated debate on the Senate floor, as every cent counts for those embracing digital currency.

A Brief History of Legislative Attempts

Attempts to ease the burden of taxes on crypto use have been underway for years. Previous similar bills proposed varying thresholds for capital gains exclusion:

1. The 2020 Virtual Currency Tax Fairness Act suggested a $200 exemption.
2. Back in 2017, there was talk of a whopping $600 exclusion.
3. The Responsible Financial Innovation Act, introduced earlier this year, echoed the $200 exclusion push.

The Road Ahead for the Fairness Act

With Congress set to for the holiday break in August, the timeline for consideration of this bill remains tight. Despite its noble intentions, the true challenge will be in gathering enough bipartisan support to push it through the Senate. Will the Virtual Currency Tax Fairness Act emerge victorious, or will it be left in the legislative dust? Only time will tell!