Legislators in Rhode Island have put forward a new bill that seeks to temporarily exempt small Bitcoin transactions from state income taxes. This initiative marks the second consecutive year that lawmakers have suggested this measure, which is intended as a pilot program aimed at easing tax burdens associated with everyday Bitcoin usage.
Introduced on January 9 by Senator Peter A. Appollonio and subsequently sent to the Senate Finance Committee, Senate Bill S2021 aims to establish a limited income tax exemption for Bitcoin transactions carried out by residents and businesses based in Rhode Island.
The proposed legislation stipulates that sales or exchanges of Bitcoin would be free from state income and capital gains taxes up to $5,000 each month, with an annual limit set at $20,000.
This bill modifies Rhode Island’s personal income tax regulations by incorporating a new section dedicated specifically to Bitcoin.
Bitcoin is defined within the bill as “a digital currency that operates on decentralized blockchain technology,” and the exemption applies both to individuals living in the state and businesses primarily operating within its borders.
If enacted, qualifying Bitcoin transactions falling below these thresholds would not count towards taxable income for state purposes.
Tax filers would be permitted to self-certify their eligibility when submitting their annual state tax returns without needing to report individual transactions. However, they must keep reasonable records demonstrating adherence to the annual limits; such records need only be provided if requested during an audit by the state.
The legislation also mandates that Rhode Island’s Department of Business Regulation provide clear guidance regarding acceptable recordkeeping practices and valuation methods. This will utilize publicly available indices for Bitcoin prices at each transaction’s time of occurrence.
It is crucial to highlight that this proposal is intended as a temporary measure. The exemption would commence on January 1, 2027, but will expire on January 1, 2028 unless extended or modified by the General Assembly after assessing its fiscal impact according to provisions outlined in the bill.
Lawmakers describe this initiative as a pragmatic approach designed to treat digital currencies more like conventional money for minor daily transactions rather than speculative assets.
Other states following suit with pro-Bitcoin measures
A few U.S. states are pursuing initiatives similar to Rhode Island’s proposed tax exemption for Bitcoin; however most do not go so far as treating it like regular currency used in everyday purchases.
A comparable example can be found in Ohio where efforts are underway towards implementing a narrow “de minimis” exemption aimed at eliminating capital gains taxes on small cryptocurrency purchases under specific dollar amounts.
An additional proactive example comes from New Hampshire which became notable in May 2025 when it became the first U.S. state allowing its treasury department permissionto invest directly into both Bitcoins along with other significant digital assets through House Bill 302—allocating up-to five percent of certain public funds into cryptocurrencies while adhering strictly under market-cap guidelines currently established around them .
This article titled “Rhode Island Reintroduces Tax Exemption Bill For Second Consecutive Year” was originally published on Bitcoin Magazine and authored by Micah Zimmerman.