Tax payments with cryptocurrencies soon possible in Colorado

In the US state of Colorado, it could soon be possible to make your tax payments with cryptocurrencies such as Bitcoin and Co. This has Jared Polis, Governor of Colorado, in an interview in prospect.

Colorado considers tax payments with cryptocurrencies

Cryptocurrencies are to be accepted for all state tax purposes in the U.S. state of Colorado as early as this summer, Governor Jared Polis revealed in a interview with CNBC.

However, the payments would be converted into U.S. dollars through an intermediary and would not be held in cryptocurrencies like Bitcoin and Co on the part of the government, Polis continues. The risks due to volatility are simply too great for that, he says.

At the same time, the expenditures of the U.S. state must be paid in dollars, which makes a conversion of cryptocurrencies necessary. Polis has been considered a proponent of cryptocurrencies for years. In 2014, he became the first U.S. politician to accept bitcoin donations for his campaign.

This was followed in May 2021 by the announcement of a tax law that would allow payments in cryptocurrencies. So now it seems that the law will actually be implemented. The governor is also receiving encouragement from the mayors of Miami (Francis Suarez) and New York City (Eric Adams). Suarez in particular is considered a proponent of cryptocurrencies and is actively promoting Miami as a Bitcoin mining location.

Taxing with cryptocurrencies: A difficult topic

In this country, however, we are still far away from the possibility of paying taxes with cryptocurrencies. In Germany, profits with cryptocurrencies are only subject to taxes if investors sell them within the first year.

Under certain circumstances, however, it can be worthwhile for investors to accept the volatility of the market and hold the cryptocurrency longer. Thus, this would then no longer have to be taxed at the personal income tax rate. However, exceptions are, for example, staking and lending.

There is still a long way to go before cryptocurrencies are accepted as a means of payment. Authorities also always warn about the associated dangers, especially of Bitcoin, which has high volatility and a poor eco-balance.

Should Colorado actually allow tax payments with cryptocurrencies starting in the summer of 2022, this would be a first pointer that could make big waves.