A wave of 2025 state bills would let agencies accept cryptocurrency for taxes and fees. Where programs already exist (Colorado, Utah), payments run through a processor like PayPal that converts your crypto to dollars instantly and adds a service fee—so the state never holds crypto. Early adoption has been tiny, but more jurisdictions are exploring similar setups.
What the new bills actually do
Most proposals don’t make crypto “legal tender.” Instead, they authorize agencies to accept crypto payments—usually by contracting a payment processor that auto-converts to USD at checkout. That keeps treasury risk low but passes processor fees to taxpayers. Colorado and Utah are live examples of this model.
How “paying taxes in crypto” really works
You choose “cryptocurrency” in the state or city tax portal.
You’re routed to a processor (often PayPal Crypto Hub).
You select a supported coin and pay; the processor converts to USD instantly.
You see a service fee (for example, $1 plus a percentage in Colorado/Utah).
The agency receives dollars, not crypto.
Why it matters: this model minimizes volatility risk for governments but means taxpayers effectively pay a convenience fee on top of their bill. In Colorado, only dozens of payments were made in each of the first three years, underscoring limited demand so far.
Fees, coins, and limits
Processor fees are common. Colorado and Utah’s implementation via PayPal includes a flat fee plus a percentage of the payment amount; Utah’s tax site documents requirements (personal PayPal account, single-coin payment). Expect supported coins to mirror the processor’s retail offering.
Tip: if you plan a large payment, compare the processor fee against a standard ACH or card fee schedule—crypto is often the costlier option for remitting taxes.
FAQs
Does my state actually hold crypto if this passes?
Typically no. Payments are auto-converted to dollars by a processor at the point of sale, so the treasury books USD. Bills and agency pages make this clear.
Are there any places already accepting crypto for taxes?
Yes. Colorado has accepted crypto for all state taxes since September 2022; Utah also supports crypto payments and posts fee guidance. Some cities (e.g., Detroit) have announced similar programs.
What coins can I use?
Usually whatever the processor supports (e.g., via PayPal’s Crypto Hub). Check your jurisdiction’s payment page before you attempt a transaction.
Is paying with crypto cheaper?
Rarely. Expect a processor fee layered on top—Colorado/Utah examples show a flat amount plus a percentage of your tax payment.
Do I still owe tax on my crypto sale when I use it to pay taxes?
Spending crypto is generally a taxable disposal in the US. The IRS reminds taxpayers to report digital asset transactions on their return. Paying a bill with appreciated crypto can trigger capital gains. Consult a tax professional.
