Accelerated Crypto Tax Reform in the U.S.! Who Benefits and Who is Limited?

By: foresightnews.pro|2026/09/18 02:47:56

The CLARITY Act has just encountered obstacles, and the U.S. crypto tax law is making significant moves.

Written by: KarenZ, Foresight News

On September 16, just one day after the CLARITY Act failed to pass the Senate procedural vote, another digital asset tax-related bill in the U.S. made progress.

Unlike the CLARITY Act, which primarily addresses the jurisdiction of the SEC and CFTC and the market structure of digital assets, the bill titled the "Digital Asset Tax Clarification Act" (H.R. 10357) focuses on a more specific issue: how should the U.S. tax digital assets?

Who proposed the bill, and what is its current status?

H.R. 10357 was introduced by Jason Smith, the chairman of the House Ways and Means Committee and a Republican representative from Missouri, on September 14. The bill has a total of eight co-sponsors, including Jodey Arrington, Aaron Bean, Mike Carey, Steven Horsford, Mike Kelly, David Kustoff, Max Miller, and Rudy Yakym.

Among them, Republican representative Mike Kelly from Pennsylvania serves as the chairman of the tax subcommittee of the Ways and Means Committee. H.R. 10357 incorporates a digital asset charitable donation provision he previously advocated, allowing eligible digital asset donations to apply a simplified tax procedure similar to that for publicly traded securities.

Democratic representative Steven Horsford from Nevada is the only Democrat among the co-sponsors. He did not just start engaging with this issue close to the vote. In May 2026, Horsford, along with Republican representative Max Miller and others, introduced H.R. 8899, the "Digital Asset PARITY Act." This bill has already addressed issues such as stablecoins, digital asset lending, wash sale rules, taxation at market value, mining and staking rewards, charitable donations, and investment trusts, some of which later appeared in H.R. 10357. Of course, H.R. 10357 does not fully adopt all the designs of the PARITY Act.

After its introduction, the Digital Asset Tax Clarification Act was referred to the House Ways and Means Committee. On September 16, the committee passed the bill with 38 votes in favor and 5 against, and the next step is to wait for consideration by the full House. Even if the House passes it, it still needs to go through the Senate and be signed by the President to take effect.

What important provisions does the Digital Asset Tax Clarification Act include?

H.R. 10357 covers ordinary users, investors, professional traders, brokers, miners, staking service providers, investment funds, and digital asset donors. The main content can be divided into the following aspects.

Transaction fees and network fees not exceeding $10 can be disregarded for gain or loss

The IRS currently generally treats digital assets as property. Using digital assets to pay fees may simultaneously constitute a disposal of an asset, requiring the calculation of the asset's cost basis and gain or loss.

H.R. 10357 proposes that when using digital assets to pay blockchain network fees not exceeding $10, or qualifying brokerage fees, transaction fees, liquidity fees, and similar fees, the gain or loss generated by the digital assets used for payment can be excluded from taxable results.

However, this does not mean that "all crypto payments under $10 are tax-exempt." The $10 threshold applies to network fees and transaction fees, not the purchase amount of goods or services. Professional traders, brokers, digital asset traders, service providers processing transactions on behalf of others, and certain entities that transferred digital assets more than 5,000 times in the previous year are generally not eligible for the ordinary user exemption.

This provision is intended to apply to asset disposals occurring after December 31, 2027.

Simplified accounting options for widely traded digital assets

H.R. 10357 allows taxpayers to choose a simplified accounting method for qualifying "widely traded digital assets," providing a voluntary simplified accounting method for "widely traded digital assets." It does not automatically apply to all investors and is not merely a reduction of taxable amounts, but allows taxpayers to aggregate annual accounting by specific asset types instead of tracking costs and confirming gains or losses for each batch of assets. Qualifying U.S. dollar stablecoins are not subject to this system.

Once taxpayers make a choice, the annual gain or loss for the same type of digital asset will be calculated using a unified formula. In simple terms, it sums the income obtained from disposing of assets during the year with the fair market value of the assets still held at the end of the year, and compares it with the cost of assets obtained during the year, the value of assets at the end of the previous year, and other adjustments specified by the bill. The portion where the former exceeds the latter is counted as annual income, while the opposite is counted as annual loss. Under this system, individual sales, exchanges, or other disposals of that type of asset occurring during the year will generally no longer require separate gain or loss recognition.

This system can reduce the work of identifying cost basis on a transaction-by-transaction basis, but it comes at a cost: gains or losses calculated under this method are uniformly treated as short-term capital gains or losses, and once the choice takes effect, it cannot be revoked for the first five tax years. The relevant rules are intended to apply to tax years beginning after December 31, 2027.

Establishing specific rules for qualifying U.S. dollar stablecoins

H.R. 10357 proposes to determine the tax basis and transaction value of qualifying U.S. dollar stablecoins based on the redemption value promised by the issuer.

Under statutory conditions, if the purchase, sale, or exchange value of stablecoins remains close to the redemption value, taxpayers generally do not need to separately recognize gains or losses due to minor price differences around $1. The bill sets thresholds such as 99.5% and 100.5%, with different thresholds applicable to different transaction stages.

This treatment does not cover all tokens pegged to the U.S. dollar. Qualifying stablecoins must generally be issued by licensed payment stablecoin issuers as specified in the GENIUS Act or by qualified foreign issuers registered in the U.S. The Treasury Department will also need to regularly publish a list of qualifying stablecoins within feasible limits.

Traders, brokers, certain high-frequency traders, taxpayers using non-U.S. dollar functional currencies, and related party transactions will also be subject to additional restrictions. The relevant rules are intended to apply to tax years beginning after December 31, 2026.

Extending some traditional financial tax rules to digital assets

H.R. 10357 prepares to allow qualifying digital assets to apply some tax systems already used for securities and commodities, mainly including:

  • Qualifying digital asset lending can apply rules that do not immediately recognize gains or losses, but the lending agreements must meet conditions such as returning similar assets;
  • Digital asset traders and qualifying professional traders can choose to be taxed at market value;
  • Foreign investors trading digital assets through U.S. brokers or agents can apply similar safe harbor rules as for securities and commodities trading;
  • Donating qualifying U.S. dollar stablecoins or widely traded digital assets can exempt some qualified appraisal requirements;
  • For other digital assets that do not fall into the above two categories and are also not tokenized digital assets, taxpayers will not be able to claim charitable deductions for directly donating the assets themselves; however, they can first sell or exchange the assets for qualifying U.S. dollar stablecoins and donate the proceeds within the specified time frame, with qualifying disposal gains not counted as taxable capital gains.

The proposed rules also clarify that these tax provisions themselves cannot be used to infer that a digital asset necessarily belongs to securities, commodities, debt, or equity under securities law or other laws.

Extending wash sale, constructive sale, and other anti-avoidance rules to digital assets

H.R. 10357, while granting digital assets some traditional financial tax treatment, also extends corresponding anti-avoidance rules to this market. The core purpose of this part is to close tax loopholes unique to digital assets, preventing investors from creating artificial losses through rapid selling and buying back, or locking in profits through derivatives without recognizing taxable events.

First is the wash sale rule. The bill proposes to include trading digital assets, excluding qualifying U.S. dollar stablecoins, under IRC Section 1091. If an investor sells a digital asset at a loss and acquires substantially identical assets within 30 days before or after the sale, the related loss generally cannot be immediately deducted but is instead added to the cost basis of the replacement asset. For example, if an investor sells Bitcoin at a loss and immediately buys back the same Bitcoin, they will not be able to immediately use that loss to offset other capital gains as they could under current rules. Contracts and options corresponding to the assets are also included; tokenized or packaged assets that are economically equivalent to stocks, securities, or other digital assets may also be recognized as "substantially identical" assets.

The bill also extends the constructive sale rule to digital assets, preventing investors from delaying taxes while effectively locking in asset gains. For instance, even if an investor does not actually sell appreciated digital assets, if they essentially lock in profits through short selling, forward contracts, or other reverse positions, tax law can treat this arrangement as a sale and require recognition of the gains that have formed up to that point.

Additionally, the bill adjusts the tax treatment of digital assets in foreign companies, U.S. territories, and hedging positions.

Clarifying the nature of mining and staking income, but not resolving the timing of recognition

The bill categorizes income generated from mining, staking, and similar blockchain validation activities as "income from digital asset validation support activities" and clarifies that it is considered ordinary income.

The source of income is generally determined by the taxpayer's residency status: related income for U.S. residents is typically regarded as U.S.-source income, while related income for non-residents is generally considered foreign-source income.

If the validation activities are conducted through fixed locations either domestically or abroad, the source will be determined based on the actual situation of that business location.

For investment trusts, the bill stipulates that a trust will not automatically lose its tax status merely because it stakes the digital assets it holds, receives staking rewards, or takes necessary liquidity management measures. However, if the entity actively operates blockchain validation business, it cannot rely on this protection.

Adjusting broker reporting rules

The bill proposes to adjust the reporting obligations of digital asset brokers to align with stablecoin rules and simplified accounting options.

Qualifying U.S. dollar stablecoins obtained close to redemption value can be processed without the ordinary transaction-by-transaction reporting method for digital assets. If taxpayers choose to use simplified accounting for a certain type of widely traded digital asset, brokers can report transactions, net gains and losses, and fair values at the beginning and end of the year by asset category.

Establishing a voluntary disclosure program for digital assets

The bill requires the Treasury Department to establish a voluntary disclosure program for digital assets within 12 months of its enactment. Qualifying taxpayers can submit applications and amended returns within 24 months after the program is established, paying back taxes, interest, and specified penalties for digital asset violations.

After completing the required remedial measures, taxpayers can receive partial civil penalty reductions; under qualifying conditions, voluntarily disclosed information will also not be used to initiate specific criminal investigations or prosecutions regarding already disclosed violations.

The bill also requires the Treasury Department to study the feasibility of using zero-knowledge proofs, smart contracts, and other blockchain technologies to improve the efficiency of information reporting, withholding taxes, tax compliance, and data protection.

The bill also includes gambling loss provisions

Finally, H.R. 10357 incorporates provisions from the FULL HOUSE Act, which are not directly related to digital assets, proposing to restore the original rules allowing taxpayers to deduct all gambling losses within the scope of gambling income.

Under current rules, starting in 2026, the deductible amount will be limited to 90% of actual gambling losses and cannot exceed gambling income. Theoretically, a taxpayer who wins $100,000 in a year and loses $100,000 may have an economic result of zero, yet could still face $10,000 in taxable income because they can only deduct $90,000 in losses. H.R. 10357 aims to repeal this change.

What does this bill mean?

H.R. 10357 aims to address: which small fees do not need to be calculated individually? How should stablecoins be accounted for? Can digital assets apply traditional financial rules? What anti-avoidance and reporting obligations should investors and platforms bear?

From a policy perspective, the value of H.R. 10357 lies not in "allowing cryptocurrencies to pay less tax," but in attempting to establish a relatively symmetrical system: reducing compliance costs that have no practical significance, allowing digital assets to receive some tax treatments already enjoyed by traditional financial assets, while also bringing over the anti-avoidance rules from traditional markets.

However, the bill is still a long way from taking effect. It has currently only been passed by the House Ways and Means Committee, and the subsequent text may still change during the review process in the House or Senate.

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