In a landmark move that could fundamentally reshape how Americans report digital assets, Congressmen Steven Horsford (D-NV) and Max Miller (R-OH) have intensified their push for the Digital Asset PARITY Act, a bipartisan legislative package aiming to modernize the U.S. tax code for the Web3 era. As of late January 2026, this discussion draft has emerged as the frontrunner for passing comprehensive 2026 crypto tax legislation, offering a strategic trade-off: tightening loopholes like wash sales while granting long-awaited relief for stakers and miners.

The "Grand Bargain": Staking Tax Deferral vs. Wash Sale Rules

The core of the Horsford-Miller proposal represents a significant compromise between industry demands and IRS enforcement goals. For years, the crypto sector has battled the IRS over the taxation of staking rewards, which are currently treated as taxable income the moment they are received—regardless of whether the asset has liquidity or has been sold.

The staking tax deferral bill component of the PARITY Act proposes a major victory for the DeFi community. Under the new draft, taxpayers could elect to defer recognizing income from mining and staking rewards for up to five years, or until the assets are sold, whichever comes first. This "middle-of-the-road" approach, praised in recent analyses by major accounting firms like BDO, addresses the liquidity crunch validators often face without granting the indefinite deferral some hardliners had hoped for.

Closing the Loophole: Crypto Wash Sale Rules 2026

However, this relief comes with a price. The legislation seeks to apply the rigorous "wash sale" rules—long standard in equity markets—to digital assets. Currently, crypto investors can sell a token at a loss to harvest a tax deduction and immediately buy it back, a strategy impossible with stocks.

If enacted, the crypto wash sale rules 2026 would disallow tax loss claims if a "substantially identical" asset is purchased within 30 days before or after the sale. This provision aims to close a gap estimated to cost the federal government billions in revenue. Tax experts warn that this change would require traders to fundamentally rethink their portfolio management strategies, particularly during market downturns.

Stablecoin Tax Exemption: A Win for Payments

Acknowledging the growing role of stablecoins in everyday transactions, the draft includes a pragmatic stablecoin tax exemption. The bill proposes a de minimis exemption for personal transactions involving "regulated payment stablecoins" where the gain is less than $200.

This provision is designed to eliminate the nightmare of tracking capital gains on a $5 cup of coffee bought with USDC. By treating these small transactions more like foreign currency exchanges than property sales, the Horsford Miller crypto draft aims to unlock the utility of digital dollars for commerce without triggering a tax event for every swipe.

Industry Reaction and The Road Ahead

The reaction to the PARITY Act has been cautiously optimistic, sharply contrasting with the open revolt currently stalling the separate "CLARITY Act" market structure bill. While industry giants like Coinbase have drawn hard lines against other regulatory proposals this month—citing unacceptable bans on stablecoin yields—the tax focus of the Horsford-Miller bill is being viewed as a more constructive "fix-it" legislation.

With IRS digital asset reporting requirements for brokers already set to ramp up for the 2026 filing season (covering 2025 transactions), lawmakers are under pressure to pass clarifying rules before the mid-year recess. The bipartisan nature of the bill suggests it has a viable path to enactment, potentially serving as the only major piece of crypto legislation to cross the finish line in 2026.

Key Takeaways for Investors

  • Deferral Option: You may soon be able to hold staking rewards tax-free for up to 5 years.
  • Wash Sales: The days of quick tax-loss harvesting loops may be numbered; plan your 2026 exits carefully.
  • Reporting: Expect granular 1099-DA forms from exchanges, necessitating robust record-keeping.