Illinois Leads the Pack with Groundbreaking Digital Asset Tax Law

Illinois has become the first US state to tax digital asset transactions. The Digital Asset Tax Act, added to the state's annual budget bill at the last minute, imposes a 0.2% tax on the value of digital assets involved in each covered transaction.

The tax applies regardless of whether an investor makes money and will be administered by businesses facilitating digital asset transactions, such as crypto exchanges and firms providing digital asset custody services.

Illinois residents buying or selling digital assets could face a new cost every time they change hands, with the tax applying to each covered transaction. For example, if an Illinois resident buys $10,000 in Bitcoin and later sells it for the same amount, they would owe $40 in taxes across both transactions.

Industry experts have raised concerns that this new tax could push activity elsewhere, adding friction to digital asset businesses operating within the state.

The law takes effect at the start of 2027 and will apply to platforms through which Illinois residents buy, sell, or trade digital assets. Businesses generating at least $100,000 in annual gross receipts from providing digital asset services to Illinois residents will be required to register as digital asset brokers.