Washington-based think tank Cato Institute has leveled strong criticism at the way bitcoin is taxed in the US. Nick Anthony, one of the institution’s researchers, argued in his published analysis that current tax rules make it almost impossible to use bitcoin as money in daily life. In the US, since bitcoin is officially considered property, not money, users are forced to calculate taxable gains or losses for even the smallest expenditure and report these transactions in detail.
Tax problems in daily use
Nick Anthony stated that technically bitcoin can be spent more easily than ever before, but the US tax law imposes a serious burden on ordinary citizens. Under the current regulatory framework, even purchasing a cup of coffee requires separate tracking of information such as purchase date, purchase cost, and value at the time of expenditure. According to Anthony, over time, these transactions result in pages of tax documents and declarations.
For each bitcoin transaction, users are required to report both when they received it and the value at the time of spending, on official documents such as Form 8949. This process significantly slows down the widespread use of bitcoin in shopping.
“Spending with Bitcoin has never been easier, but tax regulation puts an incredible burden on law-abiding citizens,” Anthony said.
In the Cato report, it is stated that capital gains tax rules encourage the holding of bitcoin as an investment instrument, but prevent it from fulfilling its role as a means of payment.
Alternative suggestions and solution searches
In the Cato Institute report, some solutions to existing problems were also brought to the agenda. These include ideas such as completely removing the capital gains tax for cryptocurrencies or introducing exemptions for payment transactions. Another suggestion is to provide exemptions for low-amount transactions.
The bill called “Virtual Currency Tax Fairness Act”, which is currently on the agenda in the USA, foresees that earnings made on crypto expenditures under $ 200 will be exempt from tax. However, Anthony points out that this amount is insufficient to cover the daily expenses of an ordinary consumer.
Thus, it is aimed to reduce both the burden on users and potential reporting confusion. According to Cato’s assessment, setting a higher threshold could pave the way for payments with bitcoin.
Tax season and policy debates
As tax season continues in the United States, the declaration processes for bitcoin and other crypto assets become more complex every year. In recent years, the Internal Revenue Service (IRS) has enacted new reporting rules that require more information from cryptocurrency holders. Industry representatives argue that these regulations are overly complex and not user-friendly in their current form.
On the one hand, especially recently, there have been signs of flexibility regarding the issue at management levels. The Donald Trump administration had previously announced that it supported the introduction of exemptions for small amounts of transactions related to crypto assets and announced that the search for legal solutions would continue.
With possible regulations, the possibility of increasing the use of bitcoin in daily payments in the USA and providing users with a simpler system in terms of taxes is being discussed. However, it remains unclear at the moment what steps will be taken in this direction and at what pace.
