- Lawmakers propose exempting small stablecoin transactions from capital gains taxes.
- Staking and mining rewards could be taxed on a deferred basis for up to five years.
- New rules aim to extend securities-related tax principles and close existing loopholes.
Bipartisan House members Max Miller (R-Ohio) and Steven Horsford (D-Nev.) are moving to simplify the tax treatment of digital assets with the introduction of the Digital Asset PARITY Act.
According to the report, the draft legislation proposes a safe harbor for regulated, dollar-pegged stablecoin transactions under $200, exempting them from capital gains taxes.
This measure is designed to reduce compliance burdens on everyday users making small crypto purchases.
To qualify, stablecoins must be issued by a permitted issuer under the GENIUS Act, pegged exclusively to the U.S. dollar, and maintain a price within 1% of $1.00 for 95% of trading days over the past year. Brokers and dealers would be excluded from the exemption.
Lawmakers are also considering an annual aggregate cap to prevent the provision from sheltering larger investment gains. The exemption is set to apply for taxable years beginning after December 31, 2025.
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Support from Capitol Hill Crypto Advocates
The new legislation also considers when staking or reward-related taxes should be incurred. Currently, the IRS considers these rewards taxable income at the point of receipt, which some lawmakers find unreasonable.
In the Miller-Horsford proposal, individuals can opt to pay their taxes related to the reward at the end of a maximum of five years, upon which the tax will be based on the fair market value.
This middle-of-the-road approach attempts to strike a balance between taxation on the receipt of funds and deferment until the point of sale.
It is more flexible for individual investors and addresses the concern of cryptocurrency advocates on the Hill, such as Sen. Cynthia Lummis (R-Wyo.), who had introduced the bill for deferment.
Extending Securities-Related Tax Rules to Digital Assets
This bill is more than an agreement on particular transactions and seeks the integration of digital assets into the existing regulation on securities.
This bill ensures that the wash sale rule applies to cryptocurrencies so that investors cannot offset their losses if they repurchase the same assets. This bill ensures the implementation of the constructive sale rule on digital assets.
The rules provide that providing loans based on liquid crypto-assets shall not give rise to any taxable event, while professional market participants could opt to use mark-to-market accounting.
Large crypto-assets donations will not require qualified appraisals, and passive-level protocol staking conducted by funds acting as investment vehicles shall not constitute trade and business.
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