New Legislation Would Make Bitcoin Transactions Under $600 Tax Free
One of the major hurdles of getting Bitcoin (or any virtual currency) adopted mainstream is that of taxes.
For each and every Bitcoin transaction there is a tax, due to it's classification as an asset as opposed to a currency.
Meaning that if you wanted to use Bitcoin to buy a pack of gum, technically you would have to report the price you acquired that Bitcoin at, the price you sold it at (to purchase the gum), and then the difference would be required to be reported as a capital gain or capital loss depending on the price fluctuation during the time you owned it.
Ouch!
I don't know about you, but that sounds like one giant headache and one that I would want no part of if I am just trying to purchase a measly ol pack of gum.
That is where new legislation comes in that was put forth by congressman Jared Polis.
Jared Polis just recently introduced legislation that would allow US citizens to pay for goods and services in crytpocurrency without reporting it for tax purposes.
The legislation is called: The Cryptocurrency Tax Fairness Act.
Catchy name right?!
It's a bipartisan act that was created along with congressman David Schweikert.
The goal of the act is to give everyone a $600 leeway to use cryptocurrency without needing to report a capital gain or loss on the transaction, which would be the requirement currently due to the classification of cryptocurrencies as an asset currently assigned by the government.
The government needs to catch up with the times!
According to Polis, the government needs new laws to keep up with modern technology.
"To keep up with modern technology, we need to remove outdated restrictions on cryptocurrencies, like Bitcoin and other methods of digital payment."
But what will that solve?
"By cutting the red tape and eliminating onerous reporting requirements, it will allow cryptocurrencies to further benefit consumers and help create good jobs."
Not only would this act help benefit consumers and create jobs, but it would also allow the technology to really expand.
It would unleash innovation on micropayment applications that process hundreds of transactions per minute but are very difficult to square with the current tax laws.
Hopefully the US chooses to go in this direction as opposed to the "banning route" China is currently going.
https://steemit.com/cryptocurrency/@jrcornel/china-bans-ico-s-is-this-good-news-or-bad-news
At the moment it seems like China is mostly a lone duck with their decision, and if other countries don't follow suit, perhaps China will flip their recent decision as well.
Stay informed my friends.
Sources:
Image Sources:
http://ashnayousaf.blogspot.com/2014/06/does-modern-technology-makes-our-life_14.html
Follow me: @jrcornel
it is i have a friend who cant sleep because of this sh... the last two month, since he traded a lot of alcos. Even myself, havent traded a lot but i have no clue or recorded what i did 5years ago. Added on that noone has a clue how to deal with that stuff in the UK. Neither taxmen nor accountants.
All tax legislation, no matter how favorable it looks is just a gimmick to gain/maintain CONTROL.
People, don't be fooled by the apparent cooperation of politicians into this matter or any other, they only have one aim, or two in one, their personal gain and government's.
It's amazing how some people never wake up, when you hear/read the word TAX, is not to your benefit, not to the common citizen's advantage.
There is an old saying:
The wolf changes his coat but not his nature.
Keep that in mind!!
I can totally imagine people buying Ferraris on credit with $600 monthly payments. :)
hahahaha that sounds like a plan
These numbers don't sound correct. For instance if you make under $600 "a year" from a company you don't have to pay taxes. When they bring up the $600 figure it makes me think is must be similiar.
http://www.FlippyCoin.com is the #1 Cryptocurrency Exchange!
Now that is interesting... ;)
Right? :D
Thanks for this. It's a great step in the right direction. Bitcoin transactions should not be taxed otherwise the currency is useless for transacting. Let them tax bitcoin options and trading of bitcoin just like they do currency traders. I believe the limit should be less than $20,000 per transaction for bitcoin should not be required for capital gains reporting. Still its going to take time to get something passed even at these levels. But you are right, if our government moves in this direction China will have to quickly join the bitcoin revolution or be left holding a big bag of us dollars and their own communist controlled fiat!
This is an excellent law. It is a pity, in our country is unlikely to introduce something like this
i do happen to prefer our system over most other systems ironically. better than some things going on in china right now!
I think you perfectly understand why you make this choice
It's certainly a step-forward in the right direction and even with a $600 leeway will help benefit businesses and consumers a like. Hopefully over time, when the Government get more behind it, then that $600 figure will grow!
@jrcornel you've done a great post here. Followed you. I'll be putting one together late on the latest news this week on China and how that impacts. Would appreciate a follow so that you can keep up to date with it!
Thanks for the article. I am sure everyone is looking forward to some relief for smaller transactions, especially as more common vendors begin accepting Bitcoin as a form of payment for goods.
What would be great if this relief could be used on a transaction by transaction basis! I am unclear on the exact mechanics of the proposed law, as I have not dived into legislation in full force (so much ground to cover on existing law).
Foreign currency transactions have de minimis rules which are not as generous as a potential $600 (it's $200 gain relief for foreign currency). Although, I wonder, is it $600 of crypto gain excluded, or $600 dollar value of the transaction...makes a difference!
The tricky double edged sword that doesn't make the headlines, in the world of foreign currency, if an individual is exchanging USD for Euro for personal use, and actually has a loss instead of a gain at the end, it is possible the loss may not be deductible. Something to watch out for in the future.
nice information @jrcornel, i hope govt. will approve it so the peoples of US can use some cryptos freely, thanks for sharing.
South Africa has been doing this all along under "Capital Gains Tax" @enazwahsdarb
During about 2005 when doing imports/exports using banks to hedge the fund you had to make note of price on the day hedging took place, then take the spot rate, wait for the day the good arrived and calc the value. Keep a running balance of profit/loss made from hedging the money and declare it.
This is not a new law and GAAP rulings made this feature for audit purposes.
A couple of years ago I had to laugh when a local proudly declared he had moved all his money into bitcoin, could leave the country without declaring. News for you I mentioned in a reply, you will have to do the calculation on date of purchase, current value and find the profit to declare in tax before leaving the country. Unless of course he was planning a quick run, not wise.
One sure thing in life is you will pay taxes, heck they even knock on your door when you dead, that is called government and law.
Nice article and thought provoking as to how blockchain, bitcoin and cryptocurrency will be handled going into the future @jrcornel
This is a very good first step. Because it's absolutely ridiculous to try to tax Bitcoin or any other cryptocurrency with a 15% capital gains which only encourages people to hold their currency as an investment for a second reason.
Where as if Bitcoin was allowed to freely move throughout our economy, that same thousand dollars -which would yield $150 in capital gains taxes would quickly generate even more taxes if it was allowed to circulate freely generating at least 5% sales tax would lead to $1,000 in taxes after circulating just 20 times.
I just think governments are absolutely stupid, they've obviously gotten too big and have too much control.