The federal tax code treats digital assets as property for income tax purposes, meaning their disposal through sale, exchange, or use to make a purchase is considered a taxable event and is thus subject to capital gains taxation. In a new insight, Director of Fiscal Policy Jordan Haring discusses a slate of bills from the House Ways and Means Committee aimed at modernizing the federal tax treatment of digital assets.

Key points:

• While the current tax treatment of digital assets applies established tax rules to a new asset class, it has created significant compliance burdens for millions of digital asset owners.
• There is a growing push by lawmakers to update the digital asset tax regime; Ways and Means Committee leaders introduced seven bills and one amendment designed to reduce the compliance burdens of using digital assets in everyday commerce and to clarify rules for common digital asset transactions.
• A modern digital asset tax regime would provide clearer tax rules, reduce compliance burdens for taxpayers, strengthen tax administration, and reinforce the United States’ position as a leader in financial innovation.

Read the analysis.