A measure to stop tax loss harvesting on cryptocurrency transactions will be included in U.S. President Joe Biden’s proposed budget, which is scheduled to be published on Thursday.
An official from the White House revealed that a tax provision meant to curtail cryptocurrency speculators’ wash sales trading will be included in the budget. Investors can already sell any cryptocurrency at a loss, deduct the loss from their taxes, and then repurchase the same quantity and kind of cryptocurrency. The Wall Street Journal estimates that the provision would raise $24 billion.
The president’s proposed budget will outline his goals in terms of money. The idea, according to White House officials, would reduce the deficit in the United States by $3 trillion over the following ten years.
Before being presented to the president for his signature, a budget must be approved by both the House of Representatives and the Senate.
This is not Washington’s first attempt to plug this “loophole”; in late 2021, legislators proposed a bill that would similarly restrict investors from declaring a loss only to repurchase the same coins.
A controversial tax provision that would impose specific reporting requirements on brokers who facilitate cryptocurrency transactions was included in the Bipartisan Infrastructure Framework, which later evolved into the Infrastructure Investment and Jobs Act, in 2021. This legislation was already passed into law by the president’s team. Many in the industry believed that the definition of “broker” was too open-ended, to the point where miners and other sorts of organizations that don’t actively support transactions or gather personal information from individuals who are conducting them may be categorized as brokers.
But it hasn’t yet released official advice, the U.S. Treasury Department has said it will define the phrase “brokers” more specifically.