Colorado becomes the first US state to accept crypto tax payments

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Colorado governor is making good on his crypto payments promise.

Important points

  • Colorado residents can now pay their state taxes in crypto.
  • The crypto tax payments must be made through PayPal and come with additional fees.
  • If you plan to make crypto payments, make sure you understand the tax implications.

Various states have touted their crypto-friendly credentials over the past few years. But Colorado has taken the step of becoming the first state to accept crypto payments for state taxes. According to that Denver GazetteColorado Gov. Jared Polis confirmed this week that the state would accept cryptocurrency payments for all state tax bills.

Colorado’s Crypto Tax Payments

Polis first proposed the crypto tax payment idea earlier this year, but it has taken a while for it to become a reality. Colorado residents can now select cryptocurrency as a payment option on the sales payment website. Cryptocurrency payments must be made through PayPal and incur a fee of $1 plus 1.83% of the payment amount.

Colorado’s pro-crypto legislation earned it a spot on The Ascent’s list of the top five crypto states. Back in 2019, the state passed the Colorado Digital Token Act, which exempts certain cryptos from securities regulations. Advances in crypto tax payments are another big step. Assuming the state follows its previously announced plans, it won’t be holding any cryptos – tax payments will be converted to dollars immediately.

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Other cities and states have introduced crypto-friendly laws and made high-profile bids for the crypto crown. For example, the mayors of Miami and New York have opted to take their first paychecks in Bitcoin (BTC), while other places have tried to attract crypto companies by making it easier for them to operate in those places.

Should You Pay Taxes With Crypto – Or Something?

Despite the drop in crypto prices, adoption continues. You can use a crypto debit card connected to your crypto exchange to make many types of payments. Also, there are a number of places where you can pay with crypto. However, there are a few things to consider.

  • Fees: There are a few different fees associated with crypto payments. You can pay a fee to buy crypto, as well as a fee when depositing fiat (traditional) currency to a crypto platform. In addition, as the Colorado example shows, there may be fees if you make the payment yourself. While crypto may not be the most expensive payment option for Colorado residents, there are also several free ways they can pay their taxes.
  • Steer: When you pay with crypto, there are tax implications. It essentially counts as selling your crypto, and you may have to pay capital gains tax. Learn more about crypto taxes here.
  • It does not fit a buy-and-hold investment strategy: If you bought bitcoin because you plan to hold it for the long term, using it to buy a coffee or pay your taxes is counterintuitive. It would be comparable to a stock investment to pay your daily bills.

It’s still very early for cryptocurrency payments. Right now, many crypto fans might find that the benefits – such as B. the possibility of being able to pay without a bank account – are outweighed by the disadvantages. This is especially the case if you’re a long-term investor planning to hold your investments for the next five, 10, or 20 years.

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