The Virtual Currency Tax Fairness Act of 2022 was introduced into the United States Senate on Tuesday by the bipartisan team of Senators Patrick Toomey and Kyrsten Sinema. The bill is a companion to the one already before the House of Representatives, although it differs in one key detail.
Both the House and Senate bills exclude small purchases made with cryptocurrency from the capital gains tax. Currently, any purchase made with crypto is a taxable event, requiring purchasers to calculate for tax purposes their gain from the change in the value of the cryptocurrency from its acquisition to the time of the transaction. The capital gains tax can range from 0%–20%, depending on a number of variables.
While #crypto has the potential to become part of our everyday lives, the current tax code stands in the way. @SenatorSinema and I are teaming up to make it easier to use digital currencies as a common method of payment by exempting from taxes small personal transactions. pic.twitter.com/B6K3jT7GBC
— Senator Pat Toomey (@SenToomey) July 26, 2022
The bill introduced into the House in February would amend the Internal Revenue Code of 1986 to exclude purchases of up to $200 from reporting to the Internal Revenue Service (IRS). The Senate version, however, sets the upper limit of the tax exclusion on purchases at $50. The IRS has explicitly stated that it expects small transactions to be tracked and reported.
Several bills have proposed a capital gains exclusion for crypto purchases. The Virtual Currency Tax Fairness Act of 2020 also proposed a $200 exemption, but that bill did not come up for a vote. A bill in 2017 suggested amending the 1986 tax code to exclude purchases of up to $600. The Responsible Financial Innovation Act, introduced by Senators Cynthia Lummis and Kirsten Gillibrand in June, also contained a $200 exclusion on purchases with crypto.
Alabama Republican Senator Toomey, the ranking member of the Senate Banking Committee, is a long-time crypto advocate. He is also the author of the Stablecoin TRUST Act, introduced into the Senate in May.
The Virtual Currency Tax Fairness Act bill is unlikely to receive consideration in the Senate before the congressional holiday in August.