US House Draft Floats $200 Stablecoin Tax Exemption & 5-Year Staking Deferral

Two U.S. lawmakers have unveiled a bipartisan discussion draft that could remove the single largest barrier to using crypto for daily payments: the tax reporting nightmare.

Reps. Steven Horsford (D-NV) and Max Miller (R-OH) released the Digital Asset PARITY Act on Saturday, a proposal designed to exempt personal stablecoin transactions under $200 from capital gains tax. The framework also offers a long-awaited compromise on staking rewards, allowing investors to defer taxes for up to five years rather than paying upon receipt.

The proposal represents a shift from “regulation by enforcement” to specific legislative carve-outs, though it demands a heavy concession from traders: the application of wash sale rules to digital assets.

The $200 “Coffee Cup” Exemption

Under current IRS guidance, spending $5 in USDC for a coffee triggers a taxable event if the stablecoin’s value fluctuated even slightly relative to the dollar (e.g., from $1.00 to $1.0001) between purchase and use. The PARITY Act creates a de minimis exemption for transactions under $200, effectively treating digital dollars like cash for consumers.

There is a catch: the exemption applies only to “regulated, dollar-pegged payment stablecoins” issued by entities permitted under the proposed GENIUS Act. This language likely excludes algorithmic stablecoins or offshore entities without U.S. registration, narrowing the benefit to compliant issuers like Circle (USDC) or PayPal (PYUSD).

Staking: The 5-Year Deferral

The draft addresses the industry’s complaint regarding “phantom income,” taxes owed on staking rewards (ETH, SOL, ADA) the moment they hit a wallet, even if the asset is locked or unsold. Instead of the full deferral sought by Sen. Cynthia Lummis (tax only upon sale), the Miller-Horsford draft offers a middle ground:

• Deferral Option: Taxpayers can elect to delay recognizing income on mining or staking rewards for up to five years.
• The Trigger: Taxes are due when the asset is sold or at the five-year mark, whichever comes first.
• Valuation: Rewards are taxed as ordinary income based on their fair market value at the time the deferral ends.

The Trader’s Cost: Wash Sales & Mark-to-Market

To balance the revenue loss from these exemptions, the draft explicitly applies wash sale rules to digital assets. This would prevent traders from selling a token at a loss to lower their tax bill and immediately buying it back, a common strategy in crypto markets today that is illegal in equities.

Additionally, the bill allows professional traders to elect mark-to-market accounting, enabling them to recognize losses annually without selling the underlying position, aligning crypto trading firms with traditional securities dealers.

“Today, even the smallest crypto transaction can trigger tax calculation while other areas of the law lack clarity and invite abuse. Our discussion draft… takes a targeted approach that provides an even playing field.” Rep. Steven Horsford

Why It Matters

This framework creates the necessary tax infrastructure for payment processors (Stripe, Shopify) to integrate stablecoins without burdening users with impossible compliance requirements. By defining a “safe harbor” for payments and staking, the U.S. moves closer to treating crypto as a functional currency rather than solely a speculative property.