Your Bitcoin coffee could stop costing 70 pages of paperwork

By TheStreet Roundtable

20 days ago

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Spending your satoshis on a latte has never been simple. Technically speaking, at least.

In cities like Washington D.C., New York City, San Francisco and Los Angeles, grabbing a latte for Bitcoin (BTC) is not something new.

The problem is what happens after you tap to pay.

According to a blog post by Nicholas Anthony of the Cato Institute's Center for Monetary and Financial Alternatives, the convenience of spending Bitcoin ends the moment you close your wallet app.

The tax code imposes a staggering compliance burden on anyone who uses Bitcoin as everyday money.

Something as routine as buying a cup of coffee each day with Bitcoin, Anthony writes, can result in over 100 pages of tax filings by year-end, and Form 8949 alone can run to around 70 pages.

What is the capital gains tax?

The culprit is the capital gains tax. In simple terms, capital gains tax is a levy on the profit you make when you sell or exchange an asset that has appreciated.

The IRS treats Bitcoin as property, not currency. So every time you spend it, even on a $5 cappuccino, you are technically "disposing" of an asset.

That means you must report the date you acquired the Bitcoin, the date you spent it, your original purchase price, and the gain or loss on each transaction, all on Form 8949, then compiled on Schedule D of your Form 1040.

Anthony identifies three compounding problems with this system.

First, capital gains tax rates favor long-term holding. It actively discourages using Bitcoin as a currency since spending it undermines the tax-advantaged hold.

Second, the sheer complexity of administering the tax creates a disproportionate burden on users of alternative currencies compared to a simple sales tax.

Third, the ever-present threat of an audit, even for simple errors in a process this convoluted, is enough to deter anyone from even trying.

How Congress could fix this

Anthony outlines four possible legislative remedies. The cleanest solution is eliminating capital gains taxes entirely.

A narrower fix would be to stop applying capital gains taxes to cryptocurrency and foreign currency use in transactions.

"Doing so would take the government’s thumb off the scale and let competition be the true decider of the best money."

A third option is exempting capital gains from all purchases of goods and services, though Anthony notes this could create its own compliance headaches if people must prove each transaction qualifies.

"That’s better than being taxed, but the process would still be taxing."

The final and perhaps most politically viable option is a de minimis exemption, a threshold below which no capital gains tax applies.

The Virtual Currency Tax Fairness Act, for example, would exempt personal crypto transactions with gains of $200 or less.

"However, the threshold should be raised substantially. One way to better tether the bill to economic reality would be to use average household spending ($80,000) as the threshold. After all, $200 can be one trip to the grocery store," Anthony argues.

The 2026 conversation on capital gains tax

The crypto capital gains debate is heating up right as Americans face the current tax season.

The IRS deadline for 2025 individual tax returns was Apr. 15, 2026, with an automatic extension available until October 15, 2026, though any taxes owed must still be paid by Apr. 15

Amid this pressure, Jack Dorsey publicly called for "a de minimis tax exemption for everyday Bitcoin transactions" on X in October 2025. This coincided with Square's rollout of Bitcoin payments for small businesses.

Sen. Cynthia Lummis responded by developing legislation proposing a $300-per-transaction exemption with an annual cap of $5,000, while Coinbase executive Lawrence Zlatkin testified before the Senate Finance Committee, urging lawmakers to codify the same de minimis standard.

Most recently, lawmakers re-introduced the PARITY Act in March 2026, which includes provisions addressing de minimis exemptions for small crypto transactions, a sign that Congress is finally treating this as a live issue, not a fringe one.