- A proposed Section 1034 would eliminate gain-or-loss recognition for purchases made with qualifying U.S. dollar stablecoins, regardless of purchase size.
- Bitcoin payments would remain taxable dispositions, although a separate proposal would exempt up to $10 in qualifying digital-asset transaction fees.
- The stablecoin and fee provisions would apply to transactions beginning Jan. 1, 2027, but both remain proposals and current IRS rules continue to apply.
Proposed tax relief would distinguish stablecoins from Bitcoin payments
Under current tax treatment, spending digital assets can create a taxable gain or loss. The IRS uses a cup of coffee to illustrate the rule: a $5 Bitcoin purchase with an allocated basis of $3 produces a $2 capital gain that must be reported on the tax return.
The proposed legislation would create a broad exception for certain stablecoin payments. New Section 1034 of the tax code would treat the disposition of covered payment stablecoins used to purchase products or services as a nonrecognition event. The provision would apply to gain or loss on the stablecoin itself, while sales taxes and other obligations connected to the purchase would remain in place.
By contrast, a Bitcoin payment at checkout would remain a taxable disposition because Section 1034 applies to stablecoins rather than Bitcoin or other digital assets. A Bitcoin user could potentially receive limited relief for the portion of the asset used to pay a qualifying network fee, but the Bitcoin sent to the merchant would remain subject to the capital-gains rules.
What qualifies as a covered stablecoin?
To qualify, a token would need to be a qualified U.S. dollar stablecoin issued by a permitted payment stablecoin issuer under the $GENIUS Act. A foreign issuer could qualify through registration with the Office of the Comptroller of the Currency or through a Treasury determination that the issuer’s home-country regulatory regime is comparable.
The stablecoin would also need to appear in Treasury’s most recent report before the payment. In addition, the taxpayer would have to have acquired the token at a price within 3% of $1.00. Treasury would publish the report at least once every three months, listing each qualified stablecoin that traded within 3% of $1.00 during the 12-month period ending in the preceding month. Users and payment companies would consult the latest list when a purchase is made.
The proposed relief would not cover traders, brokers or dealers in qualified dollar stablecoins. It would also exclude taxpayers whose functional currency is not the U.S. dollar. Treasury could extend the trade-or-business exclusion to similar businesses.
Taxpayers would have to maintain records distinguishing eligible stablecoin payments from other transactions. Covered payments would be exempt from broker information returns under Section 6045(i)(1). Brokers could rely on customer certifications and would not have to verify the 3% acquisition test for tokens purchased elsewhere.
Bitcoin fees could receive a narrower tax exception
A separate new Section 1044 would address digital-asset transaction costs. Coins disposed of to pay qualifying fees would escape gain-or-loss recognition when the aggregate value of the assets used for those costs is $10 or less. The provision would cover base, gas and priority fees, with related transactions aggregated.
The fee exception would exclude traders, brokers and dealers, as well as businesses that batch transactions or help validate transactions for others. It would also exclude assets subject to mark-to-market accounting and taxpayers who initiated more than 5,000 digital-asset transactions during the prior taxable year.
Both the stablecoin provision and the fee exception would apply to dispositions beginning Jan. 1, 2027. In practical terms, a small amount of Bitcoin used to pay a network fee on a coffee purchase could qualify for the proposed exception, while the Bitcoin transferred to the merchant would remain a taxable disposition.
The bill would also exempt qualified dollar stablecoins from the wash-sale and constructive-sale rules that it extends to other digital assets.
Earlier crypto tax proposals relied on dollar limits
Previous proposals sought to reduce tax friction for qualifying personal cryptocurrency transactions by imposing monetary thresholds. Sen. Ted Budd’s S.4171, introduced March 24, would require both the transaction value and the otherwise recognized gain or loss to be $200 or less. Related transactions would be aggregated, with exclusions including business-property transactions and exchanges involving cash equivalents.
Lummis’s S.2207, unveiled in July 2025, would establish a $300 ceiling for both transaction value and recognized loss. It would also end further exclusions once qualifying annual gains exceeded $5,000.
The House PARITY Act proposed a $200 threshold for stablecoin transactions. Lummis now cosponsors text that would tie relief to eligible stablecoins at any purchase size rather than impose a general dollar-value cap.
The House is considering a separate proposal as well. H.R.10357 was introduced Sept. 14, and the House Ways and Means Committee announced approval by a 38-5 vote on Sept. 16. Its stablecoin redemption-value accounting rules and qualifying $10 fee relief are distinct mechanisms, and committee approval is a step that precedes any House vote.
Why This Matters
The proposals would create different tax outcomes depending on the digital asset used at the point of sale. A qualifying stablecoin payment could avoid gain-or-loss recognition at any purchase size, while a Bitcoin payment would continue to require tax calculations based on the asset’s basis and value. The distinction is particularly significant for routine purchases, where users may otherwise face reporting obligations over small changes in value.
The provisions remain proposals, so current IRS treatment continues to apply. If enacted, Treasury would determine important implementation details, including the quarterly list of qualifying stablecoins, recordkeeping requirements and broker-reporting procedures. Because the proposed issuer definitions rely on the $GENIUS Act, the tokens eligible for relief would depend on issuer approvals under that law.
For everyday users, the Daines text draws its central distinction around the asset used to pay. A $5 coffee purchased with a qualifying stablecoin would fall outside gain-or-loss recognition under the proposal, while the same purchase made with Bitcoin would remain within the capital-gains system.
Frequently Asked Questions
Would a Bitcoin purchase become tax-free under the proposal?
No. A Bitcoin payment would remain a taxable disposition. Only a qualifying portion of Bitcoin used to pay an eligible digital-asset transaction fee could potentially receive the proposed exemption, limited to aggregate fees of $10 or less.
Which stablecoins would qualify for the proposed payment relief?
The token would need to be a qualified U.S. dollar stablecoin issued by a permitted payment stablecoin issuer under the $GENIUS Act. It would also need to appear on Treasury’s latest qualifying-stablecoin report and meet the acquisition-price requirement of being bought within 3% of $1.00.
When would the proposed rules take effect?
The stablecoin nonrecognition provision and the digital-asset fee exception would apply to transactions or dispositions beginning Jan. 1, 2027. They have not yet replaced the current IRS rules.