Senator Lummis Proposes $300 Tax-Free Crypto Transactions

Senator Cynthia Lummis has proposed an amendment to the U.S. budget bill that aims to reduce tax burdens on small-scale cryptocurrency activities. The amendment seeks to waive taxes on crypto transactions below $300 and cap the overall tax-free transactions at $5,000 per year. This move is intended to simplify the tax process for individuals who engage in minimal cryptocurrency activities, potentially encouraging more people to participate in the crypto market.

The amendment also addresses several other tax issues related to cryptocurrency, including staking, digital asset mining, crypto lending, wash sales, and charitable contributions. Currently, staking and mining rewards are taxed both upon acquisition and upon sale, which the industry argues is unfair. Lummis' amendment proposes to tax these rewards only when they are sold, aligning the tax policy with actual income.

In addition to staking and mining, the amendment would also apply to assets gained from airdrops and forks, taxing them only when they are sold. This change aims to simplify the tax process and reduce the burden on individuals who engage in these activities. The amendment also seeks to address the wash-trading loophole, which allows investors to sell investments at a loss and immediately repurchase them to offset gains from other investments.

The amendment is part of a broader effort to reduce tax burdens in core areas of the cryptocurrency industry. The Senate is currently going through an unlimited amendment process known as a "vote-a-rama," and Lummis sought to include this amendment in the mix. The stakes are high for congressional Republicans, as they struggle to keep all of their members in support of the bill, which faces opposition from Democrats over potential cuts to Medicaid and green energy initiatives.

The U.S. House of Representatives passed its own version of the spending bill last month, but it would have to do so again if the Senate approves it with changes. The measure's provisions could add to the U.S. budget deficit, according to analysis. The amendment has not yet come up for a vote, and its fate remains uncertain as the Senate continues to debate the budget bill.