Biden to Double Capital Gains Tax, Clamp Down on Crypto Wash Sales

Posted on by

Summary

• The Biden administration is reportedly set to release its fiscal 2024 budget plan on March 9, which aims to reduce the deficit by almost $3 trillion over the next decade.
• It includes changes to crypto tax treatment with the aim of raising around $24 billion, including an end to a strategy in which a crypto trader sells assets at a loss for tax purposes, known as tax-loss harvesting, before repurchasing them immediately after.
• Additionally, the budget proposes to nearly double the capital gains tax rate for investors making at least $1 million to pay 39.6% on long-term investments and raise income levies on corporations and wealthy Americans.

Biden’s Upcoming Budget Proposal

U.S. President Joe Biden’s upcoming budget proposal has a few surprises for crypto traders and investors. The Biden administration is set to release its fiscal 2024 budget plan on March 9, which is reportedly aimed at reducing the deficit by almost $3 trillion over the next decade. It also includes changes to crypto tax treatment with the aim of raising around $24 billion, according to newsreports.

Ending Crypto Tax-Loss Harvesting

One of these proposals includes an end to a strategy in which a crypto trader sells assets at a loss for tax purposes, known as tax-loss harvesting, before repurchasing them immediately after. Such a strategy is not permitted when stocks and bonds are involved under current wash sale rules; however, crypto is currently not under these same rules as digital assets have not been classified as securities. Now it appears that the U.S. government is looking to change that rule and apply it to cryptocurrencies too.

Doubling Capital Gains Tax Rate

The Biden budget also proposes to nearly double the capital gains tax rate for investors making at least $1 million from 20% up to 39.6%. Additionally, it plans to raise income levies on corporations and wealthy Americans according to Bloomberg reports..

Impact On Crypto Traders

The proposed new wash sale rule would have significant implications for cryptocurrency traders who engage in such strategies in order minimize their taxes liabilities through losses incurred from selling tokens or coins they own before buying them back again soon after . Danny Talwar from cryptocurrency tax software firm Koinly commented: “This will see [the US] on par with other jurisdictions such as Canada and Australia where crypto wash sales apply.”