6 months ago

    Transactions under $50 may soon be exempt from US crypto tax

    Transactions under $50 may soon be exempt from US crypto tax
    Table of contents

      According to proposed legislation under the Virtual Currency Tax Fairness Act, tabled by two Senators in late July, transactions where an assets increase in value is less than $50 will not be subject to crypto income tax in the US. The proposed legislation, put together by Senator Krysten Sinema and Senator Pat Toomey, aims to simplify taxes for small-scale crypto traders and HODLers (Hold On for Dear Life). 

      Under the legislation, the IRS (Inland Revenue Service) wouldn’t be allowed to collect tax from any crypto asset that appreciates by an amount under $50. After all, the IRS is unlikely to gain much from these types of transactions, given the small amount of taxable profit. Based on the 10% tax rate for Short-term Capital Gains, the tax collection service would only make $5, at the most, on transactions under $50. In this article, you will read about the US Crypto Tax Rate and how new changes affect it. 

      How much crypto tax you have to pay in US?

      The tax rate for crypto in the US depends on the type of activity you carry out with your crypto. You can find the different tax rates below and read our comprehensive guide to the US and Crypto by clicking here. What is the tax rate for crypto in the US? Find out below.

      What is the long-term crypto capital gains tax in US?

      Long-term capital gains apply to those who HODL their crypto for over a year, only to sell it later. It is a more risky strategy, given how volatile the crypto market can be; However, there is an advantage in a significantly lower tax rate 

      Rate For Single Individuals For Married Individuals Filing Joint Returns
      10% $0 – $40,400 $0 – $80,800
      15% $40,401 – $445,850  $80,801 – $501,600
      20% > $445,850 > $501,601

      What is the short-term crypto capital gains tax in US?

      Short-term capital gains apply to various crypto activity, including but by no means limited to mining, staking, interest, rewards, rewards, airdrops, hard forks, and liquidity pool rewards.

      Rate For Single Individuals For Married Individuals Filing Joint Returns
      10% $0 – $9,950 $0 – $19,900
      12% $9,951 – $40,525 $19,901 – $81,050
      22% $40,526 – $86,375 $81,051 – $172,750
      24% $86,376 – $164,925 $172,751 – $329,850
      32% $164,926 – $209,425 $329,851 – $418,850
      35% $209,426 – 523,600 $418,851 – $628,300
      37% > $523,600 > $628,300

      What are the crypto tax laws in the US?

      There are laws in the US about how crypto is treated when it is taxed. For a start, given that it is treated by the IRS as personal property, it can be taxed as capital assets. Secondly, it’s not just the activities listed above that are taxable. Among other things, taxes can apply when you use your crypto assets for purchases other than other coins or fiat. That’s right, you can be taxed for paying for your weekly food shop in crypto. A bit of an unlikely scenario but, nevertheless, taxable. 

      What is the tax rate for crypto in US? 

      Besides the Capital Gains Tax applicable to much crypto activity, a 3.8% net investment income tax is applicable to any income gained from crypto investment or trading for anyone who is in a higher tax bracket. For single filers, this threshold is $200,000 and for joint filers, the threshold is $250,000. 

      Apart from that, the information you need to know is detailed above or you can find a full crypto exchanges and regulation guide (including tax) for the US by clicking here. The guide goes beyond tax, telling you everything you need to know to engage with crypto in the US.

      What affect will these changes have?

      For most crypto traders or HODLers, those investing small amounts, this will be beneficial, potentially taking them out of the tax bracket altogether or leaving them in a very low one. However, this will not apply to experienced traders and those otherwise investing in cryptocurrency. These traders are likely going to make considerably more in crypto profits; however, being able to sell some of this for a profit in fiat would easily enable them to pay their taxes. 

      This change is designed, for the most part, to help those who either don’t have the experience to make particularly large amounts in profit, who would otherwise be hit with taxes, or those who aren’t looking for massive profits. 

      It may also take HODLers who stake interest in crypto accounts out of any sort of tax bracket unless they are HODLing a considerable amount of crypto. 

      What next for the US crypto tax rates?

      According to the Congress website, the bill’s stage is currency still at “Introduced”, meaning it has another three stages, at least, to go through before becoming law. Senators Sinema and Toomey have a bit of waiting before their proposed amendments may become law, if indeed, they stand up to scrutiny.

      Nevertheless, considering the benefit it may have by not penalizing small crypto traders or HODLers, this is likely to become part of the legislation currently going through Congress. 

      The aim is to ease the heavy tax burden on those dabbling in crypto, not to give everyone a free pass not to pay tax. As such, those who make considerable amounts of profit, doing this professionally, are less likely to need such a tax break, given that their financial position would enable them to easily pay their fair share of taxes. 

      Bottom line for crypto enthusiasts

      As the US continues to develop its taxation policy with regard to crypto, the burden of tax would make sense to fall on those most able to pay it. This proposed amendment would take many amateur or casual crypto enthusiasts out of the tax bracket completely and many others would pay very little as a result. 

      A bill amendment to exclude profit from transactions up to $200 was, in fact, voted down recently, taking the amount down to $50 but this could still succeed. Perceived as too high at $200, a change like this could have seen even more people taken out of the tax bracket, however, a $50 tax exclusion is still a great potential benefit for smaller crypto investors and traders. The bill is, however, only in its early stages and much could happen before it becomes law.

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