Biden Budget Plan To Close Crypto Tax Loophole For Loss Harvesting

Key Points:

• US President Joe Biden’s proposed budget includes a provision to close a loophole in cryptocurrency tax loss harvesting. This allows investors to claim losses on their taxes by selling cryptocurrencies at a loss and buying the exact amount and typing again.
• The provision is expected to rise to $24 billion and reduce wash sales trading by crypto investors.

Crypto investors could see changes to tax loss harvesting as U.S. President Joe Biden proposes to close a loophole, raising up to $24 billion and lowering the deficit by $3 trillion, as per Coindesk. Find out what this means for the industry and why it matters.

U.S. President Joe Biden’s 2023 proposed budget, to be announced Thursday, will include a provision to close a loophole on crypto tax loss harvesting, according to a White House official.

Currently, crypto investors can claim losses on their taxes by selling cryptocurrencies at a loss and buying the same amount and type of cryptocurrencies again. The proposed provision would aim to reduce wash sales trading by crypto investors and is expected to raise up to $24 billion, according to the Wall Street Journal.

The proposed budget lays out Biden’s fiscal priorities and aims to lower the U.S. deficit by $3 trillion over the next decade. The provision would need to pass through the House of Representatives and the Senate before it can go to the president’s desk for his signature.

This isn’t the first time lawmakers have tried to close this loophole. A bill was introduced in late 2021 to prevent investors from claiming a loss and then re-purchasing the same cryptocurrencies.

Biden’s team has previously passed one crypto tax-related legislation into law, the Infrastructure Investment and Jobs Act, which included a tax provision that imposes reporting rules onto brokers facilitating crypto transactions. However, the definition of “broker” was seen as too broad by many in the industry, and the U.S. Treasury Department is yet to publish formal guidance on the matter.

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