US President Joe Biden’s upcoming budget proposal holds a few surprises for cryptocurrency traders and investorsincluding a proposed doubling of capital gains for certain investors and a crackdown on laundering sales of cryptocurrency.
The Biden administration will release its fiscal year 2024 budget plan on March 9, which aims to reduce the deficit by nearly $3 trillion over the next decade. It also includes changes to the tax treatment of cryptocurrencies with the goal of raising around $24 billion.according to press reports.
One of these proposals includes ending a strategy in which a crypto trader sells assets at a loss for tax purposes, known as tax loss harvesting, before buying them back immediately afterward.according to The Wall Street Journal.
President Biden’s 2024 budget plan will seek to save hundreds of billions of dollars by lowering drug prices and raising some business taxes https://t.co/oKDdy8h5cG
— The Wall Street Journal (@WSJ) March 8, 2023
President Biden’s 2024 budget plan will try to save hundreds of billions of dollars by lowering drug prices and raising some taxes on businesses https://t.co/oKDdy8h5cG
This type of strategy is not allowed when it comes to stocks and bonds under the current wash sale rules. However, cryptocurrencies are currently not under these same rules, as digital assets have not been classified as securities.
Now It seems that the US government wants to change this situation.
Speaking to Cointelegraph, Danny Talwar of crypto tax software company Koinly commented:
“This is an unavoidable consideration for the United States, which, if implemented, will find itself on a par with other jurisdictions such as Canada and Australia where cryptocurrency laundering sales are enforced.”
“If the rule applies, the moment is significant, since many cryptocurrency holders who entered the crypto space on the back of the 2021 market peaks are taking heavy losses,” he added..
Biden’s budget also proposes to nearly double the capital gains tax rate so that investors earning at least $1 million pay 39.6% on long-term investments, up from the current tax rate of 20%.. It also plans to increase income taxes on businesses and wealthy Americans, according to Bloomberg.
Biden proposing to double capital gains taxes from 20 to 40% and not allowing for tax loss harvesting on #bitcoin ….WTF… pic.twitter.com/SnJNglpoAA
—Lark Davis (@TheCryptoLark) March 9, 2023
Biden proposes to double capital gains taxes from 20 to 40% and not allow tax loss harvesting on #bitcoin…. What the hell… pic.twitter.com/SnJNglpoAA
Update March 9, 4:19 am UTC: Added clarification that the increased capital gains tax rate applies to a certain subset of investors, according to the Bloomberg report.
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