New Bitcoin Tax Exemption Bill in Rhode Island Targets Small Transactions

TLDR

• Rhode Island lawmakers have reintroduced a bill to exempt small Bitcoin transactions from state income taxes.
• The bill proposes a temporary tax exemption for Bitcoin transactions under $5,000 per month and up to $20,000 annually.
• If passed, the exemption will apply to both Rhode Island residents and businesses that conduct Bitcoin transactions.
• The exemption will be effective from January 1, 2027, and will expire on January 1, 2028, unless extended by lawmakers.
• Taxpayers will be required to self-certify eligibility for the exemption when filing their state tax returns.

Rhode Island lawmakers have reintroduced a bill to temporarily exempt small Bitcoin transactions from state income taxes. The bill aims to ease tax burdens for residents and businesses that engage in Bitcoin transactions. If passed, the measure would become effective in 2027, providing a tax exemption on Bitcoin sales up to $5,000 per month.

Rhode Island Seeks Temporary Bitcoin Tax Relief

Senator Peter A. Appollonio introduced Senate Bill S2021 on January 9, 2026. The bill seeks to exempt Bitcoin sales or exchanges from state income and capital gains taxes for qualifying individuals and businesses. Under the proposal, transactions up to $5,000 per month would be exempt, with a maximum of $20,000 annually.

This bill defines Bitcoin as a “digital, decentralized currency based on blockchain technology” and applies the exemption to residents and businesses within Rhode Island. The tax exemption would not count toward taxable income if Bitcoin transactions stay below the monthly or annual limits. Furthermore, taxpayers would only need to certify their eligibility annually on their state tax returns, making compliance simpler.

The bill clearly states that the exemption will be temporary. If approved, it would take effect on January 1, 2027, and expire on January 1, 2028. Lawmakers have made it clear that the exemption will be evaluated after one year based on its fiscal and economic impact.

The Rhode Island General Assembly could extend or amend the exemption after reviewing its effectiveness. This provision aligns with the state’s efforts to ensure that digital currencies are treated similarly to traditional money in everyday transactions. The proposed exemption would not apply to speculative investments but focuses on routine Bitcoin use for small transactions.

Recordkeeping and Reporting Requirements

Under the proposed bill, taxpayers would need to maintain reasonable records to verify their compliance with the exemption. However, these records would only be required if the state conducts an audit. Rhode Island’s Department of Business Regulation would provide clear guidance on how to track Bitcoin transactions and determine their market value.

The department will base its guidance on publicly available Bitcoin price indices, which will help individuals and businesses ensure accurate valuation during transactions. The intention is to create a clear framework for taxpayers while minimizing administrative burdens for both taxpayers and the state.

Rhode Island’s move reflects a growing trend of states exploring ways to accommodate Bitcoin and other cryptocurrencies in their tax systems. While only a few states have followed similar measures, Rhode Island’s approach provides a temporary test for how such exemptions could function on a broader scale.

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