Crypto Tax Relief: New Bill Exempts $300 Purchases, but Extends Wash Sale Rules to Digital Assets

This legislation aims to formally integrate digital assets, like cryptocurrency, into the existing federal tax code (Internal Revenue Code of 1986). It does this by adding a formal definition for "digital asset" and establishing specific rules for common crypto activities like buying goods, lending, trading, mining, and staking. The core purpose is to provide regulatory clarity for taxpayers and the IRS, moving digital assets from a gray area into a structured tax framework, though many key details are deferred to future Treasury regulations.

The $300 Coffee Exemption: Compliance for the Rest of Us

For anyone who has ever used crypto to buy something small, this is the most immediate change. Currently, using Bitcoin to buy a $5 coffee technically requires you to calculate and report the capital gain or loss on that $5 transaction—a huge compliance headache. This bill creates a de minimis gain or loss exclusion (Section 2). If you use a digital asset to buy goods or services for personal use, you won't have to report the gain or loss, provided the transaction is under $300. This is a massive simplification for everyday users. However, there are two big catches: First, if your total gain from all these small transactions exceeds $5,000 in a single tax year, you lose the exclusion for all of them. Second, you must keep separate wallets or accounts to clearly delineate which assets qualify for this tax break, adding a strict recordkeeping requirement that could trip up busy people.

The Wash Sale Rule Comes for Crypto Traders

Active traders—the people who buy and sell crypto frequently—need to pay close attention to Section 4. The bill extends the “wash sale” rule to digital assets. This rule prevents you from claiming a tax loss if you sell an asset and then buy a “substantially identical” one within 30 days before or after the sale (a 61-day window). For example, if you sell Bitcoin at a loss today to claim the deduction, but buy it back a week later, the loss deduction is disallowed. This significantly impacts short-term trading strategies aimed at minimizing tax liability, bringing crypto in line with how stocks and bonds are treated. It’s important to note that losses from selling stablecoins are generally exempt from this rule, unless the Secretary of the Treasury says otherwise.

Good News for Miners and Stakers: Tax Deferral

Section 6 offers a major win for digital asset miners and stakers. Under current interpretations, the moment you receive newly minted crypto from mining or staking, that asset is considered ordinary income and is taxable at its fair market value. This bill changes that. It allows miners and stakers to defer paying tax on that income until the year they actually sell or dispose of the asset. This is a huge cash flow improvement, as you won't be taxed on something you haven't yet realized as cash. When the asset is eventually sold, the income is treated as ordinary income, not capital gains. This provision, however, is temporary, set to expire at the end of 2035.

The Regulatory Wild Card: Treasury’s Authority

Across almost every section (Sections 1, 2, 3, 4, 5, 6, and 7), the bill grants the Secretary of the Treasury broad authority to issue future regulations to define key terms, set exceptions, and clarify implementation. For instance, the definition of an “actively traded digital asset,” which is critical for the wash sale rule and charitable donations, is largely left to the Secretary. This is a double-edged sword: it allows for necessary flexibility as the technology evolves, but it means many of the most important operational details and exceptions are not in the bill text itself and will only be known after the IRS issues guidance. This uncertainty can make tax planning difficult in the short term.

The Sunset Clause: A Ticking Clock

Finally, nearly all the beneficial or clarifying provisions—the $300 exemption, the mining/staking deferral, the lending rules, the mark-to-market election, and the charitable contribution rules—are set to expire after December 31, 2035. While this gives the industry over a decade of clarity, it introduces significant long-term regulatory uncertainty. If Congress doesn't renew these provisions before the deadline, the tax treatment for digital assets could revert to the current, more burdensome system almost overnight, forcing businesses and individual investors to prepare for a major tax shift.