US House Draft Proposes Tax Safe Harbor for Some Stablecoin Transactions

Two bipartisan US House lawmakers have released a discussion draft that would carve out a limited tax safe harbor for stablecoin payments, marking one of the most concrete attempts yet to align crypto taxation with everyday consumer use.

Key Takeaways:

• The draft would exempt small stablecoin payments under $200 from capital gains tax.
• Staking and mining rewards could be taxed after a five-year deferral instead of immediately.
• The proposal targets consumer use, not crypto investment or trading activity.

The proposal, dubbed the Digital Asset PARITY Act, was introduced by Rep. Max Miller, a Republican from Ohio, and Rep. Steven Horsford, a Democrat from Nevada.

Both sit on the powerful House Ways and Means Committee, which oversees tax legislation, according to a Sunday report from Bloomberg.

US House Draft Would Exempt Small Stablecoin Payments From Capital Gains Tax

At its core, the bill would exempt certain small stablecoin transactions from capital gains taxes. Under the proposal, purchases made with regulated, dollar-pegged stablecoins valued at less than $200 would not trigger taxable events.

The goal is to remove the compliance burden tied to routine payments, where even minor price fluctuations can currently require users to calculate gains or losses.

Horsford argued the draft is designed to provide clearer rules while preserving the integrity of the tax system.

To qualify, stablecoins must be issued by a permitted issuer under the GENIUS Act, be backed solely by the US dollar, and have traded within 1% of $1.00 for at least 95% of trading days over the past year.

Brokers and dealers would be excluded from the safe harbor, and the exemption would not apply to other cryptocurrencies such as Bitcoin or Ether.

Lawmakers also noted they are still evaluating whether to introduce an annual cap to prevent the provision from being used to shield investment activity rather than consumer payments.

Beyond stablecoins, the draft attempts to resolve one of the most contentious issues in crypto tax policy: when staking and mining rewards should be taxed.

Current IRS guidance treats rewards as taxable income at the moment they are received, a position that has drawn criticism from industry advocates and some Republican lawmakers.

At the other end of the spectrum, Senator Cynthia Lummis has pushed for deferring taxes until rewards are sold.

The Miller-Horsford proposal takes a middle-ground approach. Taxpayers would be allowed to elect a five-year deferral on staking and mining rewards.

At the end of that period, the rewards would be taxed as ordinary income based on their fair market value. The draft describes the framework as a compromise between immediate taxation and full deferral until sale.

US House Draft Extends Securities Tax Rules to Crypto, Targets Wash Trades

The bill also extends several securities tax rules to digital assets.

It would apply wash sale restrictions to cryptocurrencies, limit strategies designed to lock in gains while delaying taxes, and extend securities lending treatment to qualifying crypto loans involving fungible, liquid assets. NFTs and illiquid tokens would be excluded.

Additional provisions would allow professional traders to use mark-to-market accounting and relax appraisal requirements for charitable donations of large-cap digital assets.

Passive protocol-level staking by investment funds would also be clarified as not constituting a trade or business.

The stablecoin safe harbor would take effect for taxable years beginning after December 31, 2025. Miller has said he believes the broader legislation could advance before August 2026.

The post US House Draft Proposes Tax Safe Harbor for Some Stablecoin Transactions appeared first on Cryptonews.