Sen. Cynthia Lummis (R-Wyo.) on July 3, 2025, released digital asset tax legislation that would rewrite how the Internal Revenue Code treats crypto for investors, traders, miners and donors. The proposal pairs taxpayer-friendly changes, including a $300 de minimis exemption and deferral of tax on staking rewards, with a change that matters most to large holders: applying the wash-sale rule to digital assets. Lummis invited public comment on the text. It is a proposal, not law.
What the bill would do
- De minimis exclusion. A new Section 139J would exclude gain or loss on small transactions where both the transaction value and the gain are $300 or less, subject to a $5,000 annual cap, with inflation adjustments beginning in 2026. Sales for cash or cash equivalents, including payment stablecoins, would not qualify.
- Wash sales. Section 1091 would be revised to cover digital assets, disallowing a loss when substantially the same asset is bought back within 30 days, with rules reaching options, forwards, futures and other derivatives.
- Mark-to-market. A new Section 475(g) would require dealers to mark actively traded digital assets to market and let traders elect that treatment, as securities traders can today.
- Mining and staking. A new Section 451(l) would defer income on mining and staking rewards until the tokens are sold, when the income would be taxed as ordinary.
- Lending. Section 1058 securities-lending rules would extend to digital asset loans, so qualifying loans generally would not be taxable events.
- Charitable gifts. Actively traded digital assets would be exempt from the qualified appraisal requirement for donations.
The Joint Committee on Taxation estimated the package would raise about $600 million in net revenue over 2025 through 2034, according to the senator's office.
Who is affected
For everyday users, the de minimis rule is the headline. For affluent investors with six- and seven-figure positions, the wash-sale change carries more weight. Crypto has been popular for tax-loss harvesting in which an investor sells at a loss and immediately buys back to keep the position; the Lummis release itself calls that an advantage unavailable to securities investors. Active traders weighing a mark-to-market election, stakers holding large reward balances and donors of appreciated tokens would also see their rules change.
The after-tax math
Example: an investor holds bitcoin bought for $600,000 that is now worth $400,000, and has $200,000 of long-term gains elsewhere in the portfolio. Selling the bitcoin and repurchasing it the same day would, under current treatment, produce a $200,000 loss to offset those gains. At the 23.8% top federal rate on long-term gains used by The Budget Lab at Yale, which includes the 3.8% net investment income tax, that loss is worth about $47,600 this year.
| Scenario | Loss recognized this year | Federal tax saved this year |
|---|---|---|
| Current practice, same-day repurchase | $200,000 | About $47,600 |
| Under the bill, repurchase within 30 days | $0 (added to basis) | $0 |
| Under the bill, wait more than 30 days | $200,000 | About $47,600, with price risk while out of the position |
A disallowed loss would not vanish. Under the basis adjustment rules, it would carry into the replacement tokens and be recovered on a later sale. The cost is timing and flexibility.
Staking works in the other direction. Example: a validator who earns $50,000 of rewards in a year would report no income until selling them. The full amount would still be ordinary income when sold, but the tax would be deferred, possibly for years.
Moves to discuss with your advisor
None of these rules apply yet, and the text could change. Households with large digital asset positions often use periods of legislative uncertainty to tighten records rather than restructure. Questions worth raising with a CPA include whether current harvesting relies on immediate repurchases, how staking income is being reported today, whether a trading operation could qualify for and benefit from a mark-to-market election, and how a planned gift of tokens to a charity would be substantiated under current appraisal rules.
What to watch
The Tax Law Center at NYU Law called the wash-sale rule a responsible addition, but argued that staking deferral and the de minimis exemption amount to subsidies and that the appraisal waiver needs study to prevent inflated deductions on thinly traded tokens. Watch whether the language moves on its own or rides with broader digital asset legislation, whether the $300 threshold and $5,000 cap survive negotiations, and what effective date lawmakers attach to the wash-sale change.
Sources
- First reported Lummis Unveils Digital Asset Tax Legislation — Office of Sen. Cynthia Lummis
- Lummis bill would provide new rules for digital assets — Tax Law Center at NYU Law
- Digital asset tax overhaul bill introduced — Grant Thornton
- Topic no. 559, Net investment income tax — IRS
- Who Would Benefit from Eliminating Capital Gains Taxes on Home Sales? — The Budget Lab at Yale
After TAX is an independent publication. Articles are general information, not tax, legal or investment advice. Consult a licensed professional about your situation.
