Overview of Cryptocurrency Tax Payments in Colorado
As of now, a minuscule fraction of income tax revenues in Colorado—just 0.0005% of the $11 billion collected since 2022—has been contributed through cryptocurrency, totaling slightly over $57,000. The state, which began permitting tax payments in digital currencies in September 2022 under Governor Jared Polis, has witnessed very limited participation.
Participation and Payment Statistics
According to data from the Colorado Department of Revenue obtained by Colorado Newsline, only eight crypto payments were made in 2022, garnering a mere $16,426. The following year saw a slight increase to 22 payments, which amounted to $23,241, but this number fell again in 2024, with 48 payments yielding $17,544.
Method of Payment
Elizabeth Kosar, the communications director for the Colorado Department of Revenue, emphasized the innovative step taken by the state under Polis’s administration but clarified an intriguing detail: Colorado does not actually receive cryptocurrencies. Instead, taxpayers utilize PayPal’s Cryptocurrencies Hub to convert their digital currencies into U.S. dollars at the point of transaction.
Perception and Future of Cryptocurrency
This revelation might challenge the perception of cryptocurrency as a viable payment method in the U.S., despite surveys indicating that around 20% of American voters have interacted with digital currencies at some point. Supporters of Bitcoin express that the low adoption rate for tax payments in Colorado is to be expected since many established cryptocurrencies are viewed more as investment assets than as transactional mediums.
Lou Kerner, founder of CryptoMondays, echoed this sentiment by referencing Michael Saylor’s principle that Bitcoin should ideally never be sold or spent.
Since Colorado’s receipt of cryptocurrencies started, Bitcoin’s value has surged over 320%, showing positive annual changes of 30% in September 2023 and an impressive 125% in September 2024.
Comparison with Other States
Currently, Utah is the only other state to accept cryptocurrency for tax payments, while Louisiana allows for digital assets to settle certain services and fines. Notably, the city of Detroit plans to begin accepting digital currency for tax obligations mid-year, also utilizing the PayPal conversion service already in use in Colorado and Utah, as opposed to Louisiana’s method using Bead Pay.
Expert Insights
Despite a global uptick in cryptocurrency ownership over recent years, experts remain skeptical about a meaningful shift toward crypto-based tax payments, especially with Bitcoin’s classification as a store of value. Kerner suggests that stablecoins are likely to become the preferred transaction form moving forward, due to their efficiency.
As the landscape of digital currency continues to evolve, it remains to be seen how public policy will adapt and whether more states will follow suit in embracing cryptocurrency for tax payment.
