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"To keep up with modern technology, we need to remove outdated restrictions on cryptocurrencies, like Bitcoin and other methods of digital payment."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
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 $1,000 in taxes after circulating just 20 times.
I just think governments are absolutely stupid, they've obviously gotten too big and have too much control.
Have been thinking about this a lot since the Polish post that covered their tax situation. Would be nice to have some clarity and simplicity so we(USA) don't get audited down the road and end up in trouble.
Hopefully something like this will get passed!
I suppose a spreadsheet could handle the cost basis analysis, but that is crazy for a pack of gum or the like!
I'm pretty sure they'll find a way to make it happen eventually :)
I hope so. Seems like they are trying to eliminate cryptos completely!
Interesting news. Reminds me of gambling winnings anything over 600$ in most states gets reported now. Very good post. Thanks
Your post is always worth reading. Thanks for the great suggestions you have given.
Yes @jrcornel
Crytocurrency now is very helpful employment opportunities for us
How will the government be facing taxation issues? We never know, we just wait
But I am very happy now with the cryptocurrecy system, this is very helpful to us, because in our country here is very hard to find real work
meep
I hope they really care about expanding technology for the benefit of the consumers and not just controlling it for the benefit of themselves.
Right... that is why the SEC is threatening exchanges, closing the doors to ICOs and Goldman Sachs is creating its very own "patented" blockchain. Wanna guess how many Goldman Sachs employees are in high-level U.S. government positions? It's a fun game.
Cryptocurrency Tax Fairness Act
very valuable and informative post u shared. thnx and appreciated.
Hay esperanza, gracias por la información
Finally, a law that actually helps people who have bitcoin!
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Great things are yet to come!
what about the people that are wondering if they can pay their mortgage or rent with crypto currencies...
This is crazy. Wait, aren't you in SA too? Because knowing Zuma, I don't see this happening hahaha! :D
Talk soon.
It would really spur a lot of small purchases and merchant acceptance. That would be amazing and would remind me of the situation of letting the small online merchants not have to charge sales tax because of the burden of trying to collect for all these different states and local cities.
voted to you, thank you
Awesome!!! As the Bitcoin gains more steam, which it will, more and more people will start using it. Already the major banks are all creating their own cryptocurrency. Looks like the know the blockchain is amazing in there getting in on it...
Seems like good legislation.
As long as it stays like this I think I would actually be fine with it.
But it opens up the door for more legislation in the future.
Every little bit helps. I wish Gov would stay out of crypto but you know that wont happen!
don't get me wrong im all for this but... i love politician speak
Tax FAIRNESS act... what does it do? make it BETTER to use bitcoin by giving it an exemption cash and credit with usd doesnt have.
I hope they do change the law and soon.
Your post was very insightful, I look forward to reading more of your content @jrcornel
How does the tax function for Faucet claims? I mean...it's a "gain", but it's so damn small, you're looking at such tiny fractions of a cent...
Do they keep a ledger of all fractions until you reach a taxable cent?