U.S. Lawmakers Propose PARITY Act for Crypto Tax Rules

by · Blockonomi

TLDR

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  • The PARITY Act aims to modernize crypto taxation by updating rules for staking, trading, and low-value transactions.
  • The bill offers a $200 capital gains exemption for stablecoin payments if issued by regulated, dollar-pegged entities.
  • Staking and mining rewards may qualify for tax deferral until the assets are sold or exchanged under the proposed rules.
  • The bill applies wash sale rules to digital assets to prevent traders from harvesting tax losses on similar positions.
  • A mark-to-market option and derivative sale rules are included to align crypto reporting with traditional finance standards.

A bipartisan pair in the U.S. House has introduced draft legislation that seeks to simplify crypto taxation for users and developers. Representatives Max Miller and Steven Horsford announced the Digital Asset PARITY Act on December 20, aiming to reform outdated tax rules. The bill addresses staking, stablecoin transactions, wash sales, and income reporting under the Internal Revenue Code.

PARITY Act Seeks Tax Clarity on Staking, Low-Value Payments, and Stablecoins

The PARITY Act would provide optional tax deferral for staking and mining rewards while creating exemptions for small stablecoin transactions. Under the draft, digital asset holders could defer taxes on staking until they sell or exchange the tokens. The bill also introduces a $200 exemption for capital gains on stablecoin payments if the tokens are dollar-pegged and issued by regulated entities.

The legislation defines the tax treatment for digital assets in a way that mirrors traditional securities and commodities. It targets “phantom income” issues by ensuring that taxpayers don’t report earnings without receiving liquid value. “America’s tax code has failed to keep pace with modern financial technology,” said Rep. Miller during the announcement.

He added that the proposal “brings clarity, parity, fairness, and common sense to the taxation of digital assets.” The bill would also extend certain exemptions to non-U.S. investors using American trading platforms. Most provisions would take effect immediately, while the stablecoin rules apply starting in tax years after December 31, 2025.

Draft Bill Closes Loopholes in Loss Harvesting and Derivative Trading

The proposed bill applies wash sale rules to crypto to prevent traders from claiming losses while holding similar positions. This change aligns crypto tax reporting with the treatment of traditional securities, closing long-criticized loopholes. A mark-to-market election for active traders is included to simplify annual reporting of unrealized gains and losses.

It also introduces rules on “constructive sales” to address tax deferral through derivative-based strategies. Another section offers tax exemptions for certain digital asset loans but excludes NFTs and illiquid tokens from this benefit. These measures aim to balance compliance with the industry’s demand for fair treatment under federal tax law.

“Today, even the smallest crypto transaction can trigger tax calculation,” said Rep. Horsford, calling the proposal a targeted and practical reform. He added that the draft gives consumers and developers a clear and fair framework. The bill is currently under review as a discussion draft before formal introduction in the House.

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