Rhode Island lawmakers have introduced a bill that would temporarily exempt small-scale Bitcoin transactions from state income taxes, marking the second consecutive year legislators have proposed the measure as somewhat of a pilot program to reduce tax friction on everyday Bitcoin use.
Senate Bill S2021, introduced on January 9 by Senator Peter A. Appollonio and referred to the Senate Finance Committee, would create a limited income tax exemption for Bitcoin transactions conducted by Rhode Island residents and Rhode Island-based businesses.
Under the proposal, Bitcoin sales or exchanges would be exempt from state income and capital gains taxes up to $5,000 per month, with a $20,000 annual cap.
The bill amends Rhode Island’s personal income tax code by adding a new section specifically addressing Bitcoin.
It defines Bitcoin as a “digital, decentralized currency based on blockchain technology,” and applies the exemption to both individuals residing in the state and businesses that are based and operate primarily within Rhode Island.
If passed, qualifying Bitcoin transactions below the exemption thresholds would not be included in taxable income for state purposes.
Taxpayers would be allowed to self-certify eligibility on their annual state tax returns and would not be required to report individual transactions, provided they maintain reasonable records demonstrating compliance with the annual limit. Those records would only need to be produced if requested by the state for audit purposes.
The legislation also directs Rhode Island’s Department of Business Regulation to issue plain-language guidance outlining acceptable recordkeeping practices and valuation methods, using publicly available Bitcoin price indices to determine market value at the time of each transaction.
It’s important to note that the proposal is explicitly temporary. The exemption would take effect on January 1, 2027, and sunset on January 1, 2028, unless extended or amended by the General Assembly after reviewing its fiscal and economic impact, per the bill.
Lawmakers characterize the measure as a practical program aimed at treating digital money more like traditional money for small, everyday transactions rather than speculative investments.
Other states like Rhode Island taking on pro-bitcoin initiatives
Only a handful of U.S. states have taken steps similar to Rhode Island’s proposed Bitcoin tax exemption, and most stop well short of treating Bitcoin like everyday money.
Ohio is a close comparison, which is trying to adopt a narrow “de minimis” exemption that removes state capital gains taxes on small crypto purchases under a low dollar threshold.
New Hampshire is another state actively championing Bitcoin. In May 2025, New Hampshire became the first U.S. state to allow its treasury to invest in Bitcoin and other large-cap digital assets, authorizing up to 5% of certain public funds to be allocated into crypto under House Bill 302. Bitcoin currently qualifies under the market-cap rule.
