Rhode Island Reintroduces Bitcoin Tax Exemption Bill

Lawmakers in Rhode Island have reintroduced a bill that would create a temporary income tax exemption for small-scale Bitcoin transactions. This marks the second consecutive year that legislators have proposed the measure.

The proposed legislation, known as Senate Bill S2021, is designed to function as a pilot program. Its primary goal is to reduce tax friction, encouraging the use of Bitcoin for everyday transactions rather than solely for speculative investment purposes.

Introduced on January 9 by Senator Peter A. Appollonio, the bill was subsequently referred to the Senate Finance Committee. The legislation seeks to amend Rhode Island’s personal income tax code by adding a new section specifically dedicated to Bitcoin.

Under the proposal, both individuals residing in the state and businesses based and operating primarily within Rhode Island would be eligible for the exemption. The bill defines Bitcoin as a “digital, decentralized currency based on blockchain technology.”

The exemption would apply to Bitcoin sales or exchanges and would exclude these transactions from state income and capital gains taxes, provided they stay within the following limits:

• Up to $5,000 per month
• A $20,000 annual cap

Qualifying transactions below these thresholds would not be included in taxable income for state purposes if the exemption is passed into law.

The bill outlines a streamlined process for taxpayers to claim the exemption. Individuals and businesses would be allowed to self-certify eligibility on their annual state tax returns. They would not be required to report individual transactions as they occur, provided they maintain reasonable records to demonstrate compliance with the annual limit.

These records would only need to be produced if requested by the state during an audit. To ensure clarity and ease of use, the legislation directs the Department of Business Regulation to issue plain-language guidance.

This guidance would outline acceptable recordkeeping practices and valuation methods. Specifically, it would mandate the use of publicly available Bitcoin price indices to determine the market value at the time of each transaction.

A critical component of the proposal is its explicitly temporary nature. The exemption is structured as a time-limited pilot program to evaluate its impact before any permanent changes are considered.

The timeline for the proposed exemption is as follows:

1. Effective Date: January 1, 2027
2. Sunset Date: January 1, 2028

The exemption would automatically expire on the sunset date unless it is extended or amended by the General Assembly. Lawmakers have stipulated that any decision to extend the program should be based on a review of its fiscal and economic impact during the pilot period.

Rhode Island’s initiative is part of a growing, albeit select, group of state-level efforts to integrate digital assets into traditional financial frameworks. Most states have stopped well short of treating Bitcoin like everyday money for tax purposes.

For instance, Ohio has explored a narrow “de minimis” exemption that would remove state capital gains taxes on small crypto purchases, but under a lower dollar threshold than the one proposed in Rhode Island.

Meanwhile, New Hampshire has taken a different approach. In May 2025, it became the first U.S. state to allow its treasury to invest in Bitcoin and other large-cap digital assets. Under House Bill 302, the state authorized the allocation of up to 5% of certain public funds into cryptocurrency.

The reintroduction of Senate Bill S2021 signals a continued legislative interest in adapting tax codes to the realities of digital currency. By focusing on small, everyday transactions, the bill attempts to distinguish between using Bitcoin as a currency and using it as a speculative asset.

As the bill moves through the Senate Finance Committee, its progress will be closely watched by both cryptocurrency advocates and fiscal policy analysts. The outcome of this pilot program could set a precedent for how other states approach the taxation of digital assets in the future.