Biden Budget to Close Crypto Tax Loophole, Raising $24B
Biden’s Budget Plan to Close Crypto Tax Loss Harvesting Loophole
• President Joe Biden is expected to unveil a budget proposal on Thursday that includes a provision to close the tax loss harvesting loophole for crypto transactions.
• The provision would be expected to raise $24 billion in revenue, by preventing investors from claiming losses on their taxes and then buying the same amount and type of cryptocurrencies again.
• The proposed budget also includes other measures intended to reduce the U.S. deficit by $3 trillion over the next 10 years.
What is Tax Loss Harvesting?
Tax loss harvesting is a technique used by investors to offset capital gains taxes by selling investments at a loss in order to claim the loss on their taxes. In the case of cryptocurrency, investors can sell any cryptocurrencies at a loss and then buy back the same amount and type of cryptocurrencies again, thereby reducing their overall tax burden.
Previous Efforts to Close this Loophole
Lawmakers have previously introduced legislation intended to prevent investors from using this loophole, including a bill in late 2021 that would similarly prevent investors from claiming a loss only to repurchase the same cryptocurrencies again. However, these efforts have not yet become law as they must pass through Congress and receive approval from President Biden before they are officially enacted.
Bipartisan Infrastructure Framework Includes Crypto Tax Provision
The Bipartisan Infrastructure Framework was passed into law in 2021 as part of the Infrastructure Investment and Jobs Act, which included a controversial tax provision that would impose certain reporting rules onto brokers facilitating crypto transactions. This definition of „broker“ was seen by many in the industry as overly broad, potentially encompassing miners who don’t directly facilitate transactions or collect personal data about customers during payments or transfers involving cryptocurrency.
President Joe Biden’s proposed budget will include provisions intended to close tax loopholes related to crypto trading and taxation while raising revenue for U.S government spending initiatives over the next 10 years. These proposals must pass Congress before becoming official policy, but if approved could significantly impact how individuals trade cryptocurrency going forward