Senator Lummis Introduces Crypto Tax Reform Bill With $300 De Minimis Exemption

U.S. Senator Cynthia Lummis (R-WY) has introduced a comprehensive crypto tax reform bill aimed at simplifying digital asset taxation for users. The legislation proposes a $300 de minimis exemption for crypto transactions, which would exempt small transactions from capital gains taxes. This exemption is designed to make everyday use of digital assets more practical for Americans, as taxpayers can claim up to $5,000 annually through this exemption. The goal is to align digital assets with foreign currency rules already in the tax code, thereby reducing the reporting burden on small purchases and promoting the use of crypto as a medium of exchange without overwhelming users with paperwork.

The bill also addresses the challenges faced by digital asset users in calculating small gains from frequent transactions. By exempting transactions under $300, the legislation ensures smoother adoption of digital currencies for everyday use and maintains fairness in tax reporting. The exemption adjusts for inflation beginning in 2026 and aggregates related transactions to avoid misuse, mirroring how the IRS treats minor foreign exchange gains to simplify compliance for digital payments.

In addition to the de minimis exemption, the bill aims to change how mining, staking, and airdrop rewards are taxed. Currently, these rewards are taxed when received, even without conversion to cash, creating liquidity issues. The proposal shifts the taxable event to the point of sale, aligning income recognition with actual economic benefit. This change helps miners and stakers avoid premature tax bills on unsold or illiquid digital assets. Under the bill’s new Section 451(l), ordinary income would be recognized only when assets are sold, eliminating the double taxation that miners and stakers currently face under the outdated tax framework. This reform ensures that taxation is tied to realized gains, not fluctuating market prices at the time of reward, reflecting a more balanced approach to taxing blockchain-based income.

The legislation also introduces a mark-to-market election for crypto traders and dealers, similar to rules for securities and commodities. Dealers must apply this rule mandatorily, while traders may choose it voluntarily for actively traded digital assets. This change improves tax consistency across financial sectors. The bill applies similar rules to securities lending under Section 1058 for those lending digital assets, ensuring that lending transactions do not trigger immediate tax consequences but follow adjusted basis and income rules. This provision supports a more efficient crypto market structure.

Charitable donations of crypto also benefit under this bill, as actively traded digital assets will not require a qualified appraisal. This change encourages digital asset donations by treating them like publicly traded securities, simplifying donation rules and supporting broader philanthropic use of crypto without bureaucratic delays.

The Senate Banking Committee is focusing on market structure and stablecoin regulation ahead of the September deadline. Lummis must navigate limited floor time and procedural hurdles to advance her proposal. The reforms could raise approximately $600 million between 2025 and 2034, according to the Joint Committee on Taxation. Lummis has also called for public feedback to refine the bill further, demonstrating a commitment to creating a more user-friendly and efficient tax framework for digital assets.