INSIGHT

The Cryptocurrency Tax Fairness Act of 2017

Inna Merzheritsky, Daniel Figueredo • October 3, 2017

Services: IT Assurance, Outsourced Accounting, Business Applications Industries: Blockchain & Digital Assets

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In September 2017, U.S. House Representatives, Mr. Polis and Mr. Schweikert, have introduced the Cryptocurrency Tax Fairness Act in Congress. This bipartisan bill might make it much easier to use Bitcoin to pay for everyday purchases of goods and services.

The bill contains two main provisions. 

First, it creates a “de-minimis” exemption for cryptocurrency transactions for goods or services. 
In absence of the provision, any purchase made with a bitcoin is considered a disposition of property and subject to tax on the appreciation of the bitcoin used. For example, if you buy coffee with a bitcoin, you may owe tax on the value of the difference in the coffee price and your original basis in the bitcoin.

Under the proposed bill, any transaction under $600 would be exempt from tax. Thus, taxpayers would not need to track gains and calculate tax on small purchases. The exemption is similar to a de-minimis exemption for personal transactions made with a foreign currency.

Second, Cryptocurrency Tax Fairness Act would require the Treasury Department to issue guidelines for informational reporting on digital currency transactions resulting in capital gains.

If approved by Congress, the bill would apply to transactions entered into after December 31, 2017.

We believe this is the first time a bill has been introduced in Congress to encourage use of cryptocurrencies.