Bitcoin will be accepted for tax payments in Colorado

[nullama]

Governor of Colorado, Jared Polis, announced in an interview with CNBC[1] that people will be able to pay their state tax using Bitcoin from around mid-2022, with plans of including the option to pay for most other things from the state such as licenses a few months after that.

They won't be holding any bitcoin though, they will be converting Bitcoin to USD at the exact moment they receive it.

Just like accepting a credit card, but with a much lower transaction cost

This would make Colorado the first US state to accept Bitcoin for tax payments, joining the canton of Zug in Switzerland which started doing so in 2021, and of course El Salvador.

Also worth noting the governor has been a long time fan of Bitcoin, as he was the first US politician to accept campaign donations in Bitcoin[3].

[1]: https://www.youtube.com/watch?v=pO3TMlEpJ4U&t=414s
[2]: https://www.investing.com/news/cryptocurrency-news/the-swiss-canton-of-zug-openly-embraces-bitcoin-and-ethereum-now-accepts-crypto-tax-payments-2423315
[3]: https://timestabloid.com/colorado-governor-just-announced-that-his-state-will-accept-bitcoin-for-tax-payments/

[CaVO32]

The move will be beneficial in terms of convenience and transaction fees. It is true that some credit card companies are charging hefty fees. But for the user to get acquianted on this payment method, they need to learn some basic crypto info, how to buy crypto and how to send crypto. The government should also give some basic tutorials on how to do it so their constituents will be confident that they are doing it right.

[DapanasFruit]

We should be taking this as another victory for Bitcoin in the government and hopefully other states can see the benefits of being paid in Bitcoin in their day-to-day business with the people. I am a little bit surprised that Governor Jared Polis is actually a Democrat as cryptocurrency seems to have more supporters in the other side of the aisle in political spectrum with many progressive Democrats not liking it. I am happy for the people of Colorado as they now have an option on how to pay things better with more convenience and less hassles.

[franky1]

The move will be beneficial in terms of convenience and transaction fees. It is true that some credit card companies are charging hefty fees. But for the user to get acquianted on this payment method, they need to learn some basic crypto info, how to buy crypto and how to send crypto. The government should also give some basic tutorials on how to do it so their constituents will be confident that they are doing it right.

this is not about getting fiat holders to convert to btc to then pay tax..
this is about btc holders paying tax without themselves needing to convert to fiat first

i believe[cynically] the next step.. once btc payment methods are available.. would be that the state then demands a tax on crypto. where by as soon as a person makes yearly 'gains'(year end valuation increase) they are supposed to pay tax on those gains in btc for that year.

rather then the old way of waiting for the person to convert to fiat, where its only then declared as gains once they declare they have extra fiat
old way: (hoarding coin for 5 years=no fiat gains for 4 years 11month 27days)

[DannyHamilton]

rather then the old way of waiting for the person to convert to fiat, where its only then declared as gains once they declare they have extra fiat
old way: (hoarding coin for 5 years=no fiat gains for 4 years 11month 27days)

Additionally, at the time of paying the taxes with BTC (or any other crypto), the person making the payment will experience capital gains (or loss) on the value of the coin that they used for payment even though they didn't convert it to fiat. Therefore, they'll owe capital gains tax (or potentially can deduct a capital loss) when they file the next year's taxes. According to the government's current rules regarding cryptocurrencies in the U.S., spending cryptocurrencies to make a payment on anything is identical (in terms of legal tax responsibilities) to converting it to the same amount of fiat and then spending the fiat, and the same taxes are owed even though you didn't personally covert to fiat.

[qwertyup23]

Governor of Colorado, Jared Polis, announced in an interview with CNBC[1] that people will be able to pay their state tax using Bitcoin from around mid-2022, with plans of including the option to pay for most other things from the state such as licenses a few months after that.

They won't be holding any bitcoin though, they will be converting Bitcoin to USD at the exact moment they receive it.

This seems reasonable on their point of view especially considering that the realm of cryptocurrencies is starting to dominate our finances. Though the only problem that I see is that, this could either make or break the profit of the government since these BTCs will be converted as soon as the former receives it.

I do think that they are somehow missing the opportunity of at least investing 10-40% of the these BTCs for long-term. Given the fact that BTCs may soon takeover our finances, this move can spark the interest of other countries to do the same thing.

[dothebeats]

I don't see people using bitcoin to pay their taxes, but it's great that they are opening that option for people should they want to try another route for payments. As for their plan on instantly selling bitcoins the moment they receive it, I guess it will not have an adverse effect on the market, as the volume of payments made through this route would be low for sure. Overall though, being able to pay your taxes with bitcoin is a cool thing, though we all know that not everyone will part ways with their bitcoin just to pay taxes.

[kryptqnick]

From what I've seen, state taxes only account for 20% in the US, with a vast majority of taxes collected being federal. So if Colorado makes a decision, it won't affect most taxes people pay. I also wonder if a decision to collect taxes in Bitcoin is something a state can decide on its own or if the green light must be given on the federal level for that as well. And if they collect the taxes in Bitcoin, but then convert them into fiat, doesn't it call for a sell tax on behalf of whoever does the conversion? I wonder if a decision like this can actually work in the US.

[kentrolla]

Finally some good stuff after a dull phase and decisions taken against Bitcoin in countries like India, this is a good sign but at the same time I don't think it's a wise decision to covert the Bitcoin into fiat at the same moment, because there are more chances of achieving more profit if they hodl in or set a rules like coverting the collected bitcoin (tax) it every financial year or when market is good.

But I doubt this will happen or not as it's more likely to be stalled because regulators and financial institutions will try their best to stop bitcoin from becoming mainstream because of this happens then bitcoin will become unstoppable and even those who don't use Bitcoin will start using it as it will give legitimacy to bitcoin as something which is considered by the government.

[DannyHamilton]

Though the only problem that I see is that, this could either make or break the profit of the government since these BTCs will be converted as soon as the former receives it.

This will have zero effect on the profit of the government.  It will be immediately exchanged for fiat at the time of payment, so the government will receive exactly the amount of money they are expecting.  No more, no less.

I don't see people using bitcoin to pay their taxes, but it's great that they are opening that option for people should they want to try another route for payments. they receive it, I guess it will not have an adverse effect on the market, as the volume of payments made through this route would be low for sure.

Even if the volume of payments were large, it would not have an adverse effect on the cryptocurrency market. Anyone that is paying their taxes with cryptocurrency would have paid their taxes in fiat if the cryptocurrency payment option weren't available.  To make their payments in fiat, they would EITHER have needed to pay with fiat funds that otherwise could have been used to purchase cryptocurrency (reducing demand in the market and therefore reducing the exchange rate), or they would have needed to sell some of their cryptocurrency holdings in order to make the tax payment (increasing market supply and therefore reducing the exchange rate).  Therefore, the sale of the cryptocurrency by the transaction processor will simply be moving that market pressure from the payor to the processor with no net effect on the exchange rate in comparison to if the governemtn didn't offer the cryptocurrency payment option.

Overall though, being able to pay your taxes with bitcoin is a cool thing, though we all know that not everyone will part ways with their bitcoin just to pay taxes.

EVERY payment that you make regardless of the method you use to make the payment, is causing you to part ways with your bitcoin whether you realize it or not.
Either:

• You are paying directly with your bitcoin.
• You are selling your bitcoin in order to make a payment with some other currency
• You are using currency that COULD HAVE been used to purchase and hold bitcoin if you didn't make that payment, thereby reducing the total amount of bitcoin you could have been holding.

All 3 options result in you holding less bitcoin than you could have held if you didn't need to make the payment.

doesn't it call for a sell tax on behalf of whoever does the conversion?

This probably depends somewhat on jurisdiction as each state has its own rules on sales tax, but here in Illinois, there is no sales tax on the purchase or sale of cryptocurrencies.  There is, however, a capital gains tax that must be paid on the difference in the value of the cryptocurrency between when it was acquired and when it was sold or used. Alternatively, the seller can take a capital loss deduction against other similar capital gains if the value at the time of sale or use is lower than at the time of acquisition.

[Accardo]

This news is a huge acceptance of bitcoin in the United States where so many people didn't believe in bitcoin. Paying taxes in bitcoin will boost the usage of bitcoin in Colorado and citizens of the State will discuss the implementation of bitcoin to other Citizens in different states. Such topics among people in the USA will help disseminate the usage of bitcoin in USA. The Government of Colorado will have to fight with the volatility of bitcoin and also wait to see the other side of bitcoin the fact that their tax can increase while in the wallet where it'll be saved.

[DannyHamilton]

The Government of Colorado will have to fight with the volatility of bitcoin and also wait to see the other side of bitcoin the fact that their tax can increase while in the wallet where it'll be saved.

Clearly you didn't pay any attention to what was said about this.

[Vaskiy]

The governor is quite interested in adopting the growing technology as people are getting much used to it. Maybe this can be the initial step of having the state's fund in bitcoin. As of now very few organization maintain bitcoin reserve moving traditional fiat to bitcoin. With Colorado State authority the tax being paid is converted to fiat and added. Maybe this can later be a direct payment. As in the OP, long back itself the governor is more positive about bitcoin. However this is same as paying in fiat.

[sunsilk]

I think it is not the first state to accept payments in tax through bitcoin. IIRC, there's the state that's earlier than Colorado that has announced this rule.

It's Ohio and this was the news that makes them the first state.

Ohio Becomes First US State to Allow Taxes to Be Paid in Bitcoin

The news was from 2018 but CMIIW if there are some changes that makes Colorado as the first.

[bittraffic]

Charles Hoskinson of Cardano must be happy with this news as he lives in Colorado.

That's good. I notice more states are racing to be more crypto-friendly and even created thier own coin like Miami. The US is adopting Bitcoin to different states but at the same time is puzzling because the government departments are also trying to prevent other countries like El Salvador from adopting BTC.

[virasog]

Charles Hoskinson of Cardano must be happy with this news as he lives in Colorado.

That's good. I notice more states are racing to be more crypto-friendly and even created thier own coin like Miami. The US is adopting Bitcoin to different states but at the same time is puzzling because the government departments are also trying to prevent other countries like El Salvador from adopting BTC.

This situation of legalizing bitcoin and resisting bitcoin so that it is not gets adopted will continue but slowly everyone will have to accept bitcoin.
Although governments are against bitcoin adaption but they can't resist much again the public. That's why we hear news of bitcoin being adapted every now and then.

[stompix]

Ohio Becomes First US State to Allow Taxes to Be Paid in Bitcoin
The news was from 2018 but CMIIW if there are some changes that makes Colorado as the first.

Ohio allowed only business to pay their taxes for a while with crypto then stopping payments altogether in less than a year before it could be implemented for all the population.

While, for now, the facility is available only for businesses, it is reportedly expected to be made available to individuals in the future.

So, with the above future not happening, technically this will make Colorado the first state where you can pay your personal taxes with crypto.

I don't see people using bitcoin to pay their taxes, but it's great that they are opening that option for people should they want to try another route for payments. As for their plan on instantly selling bitcoins the moment they receive it, I guess it will not have an adverse effect on the market, as the volume of payments made through this route would be low for sure. Overall though, being able to pay your taxes with bitcoin is a cool thing, though we all know that not everyone will part ways with their bitcoin just to pay taxes.

As DannyHamilton said, you will pay taxes you will pay money, Bitcoin is money, you pay 1000$ from your BTC stash it means you have $1000 extra on your card you can use to buy coins. It's a matter of having a card in Euros and one in Usd, with the easiness nowadays to exchange back and forth it's pretty simple to keep your balances.

A real problem I could see in it is that a lot of people will try to avoid paying simply because they don't want to have their names on a list of people who own bitcoins, as they want to keep their stash hidden, and second, because some might fear the IRS could do some chain analysis and link their addresses to some weird things so better stay away from it.

[sunsilk]

Ohio Becomes First US State to Allow Taxes to Be Paid in Bitcoin
The news was from 2018 but CMIIW if there are some changes that makes Colorado as the first.

Ohio allowed only business to pay their taxes for w while with crypto then stopping payments altogether in less than a year before it could be implemented for all the population.

While, for now, the facility is available only for businesses, it is reportedly expected to be made available to individuals in the future.

So, with the above future not happening, technically this will make Colorado the first state where you can pay your personal taxes with crypto.

Thanks.

They should do next as what Colorado had done. So far, two of them are legally accepting payments of taxes into crypto and I think this is an opening for the other states that they shall consider doing so.

This makes me think of people in the authority, the higher position would say something out of this when the adoption is getting vast. Like those in position that strongly disagree this adoption.

[ShowOff]

I do think that they are somehow missing the opportunity of at least investing 10-40% of the these BTCs for long-term. Given the fact that BTCs may soon takeover our finances, this move can spark the interest of other countries to do the same thing.

I don't think the government would be brave enough to invest the bitcoin it receives as tax or at least hold it for a certain period of time to make a profit. Price fluctuations will be taken into account and I think if they do then they should be prepared if the tax revenue they should have received in a certain amount of x might be lower than they should have been at the time of the convention.

A tax receipt plan with bitcoin may sound great, but that doesn't mean fiat holders will convert to bitcoin to pay taxes. The plan appears to only target bitcoin or crypto users or investors who prefer to be safe not to convert them to fiat before paying taxes. If this is interesting enough then I think other countries will also start adopting it but it all still really depends on the legality of bitcoin in that country.

[Darker45]

As an official policy of a state in the US, this is definitely a big deal. As to whether or not there are in fact people who will actually be paying state tax with the use of Bitcoin, it's a different story. But what is important here is that Bitcoin has gained another step forward. Even if in the first couple of years there's nobody paying taxes in Bitcoin, it doesn't take away the fact that the state government has recognized Bitcoin.

By the way, I'm curious how paying in Bitcoin has a much lower transaction cost than paying in credit card? Perhaps they will make use of the Lightning Network, which wasn't mentioned in the article?

As to the prospect of a state token, I'm now doubting if the governor is indeed a Bitcoin fan.