Altering the Tax Classification of Transactions Involving Cryptocurrencies Is Going to Be a Proposal in President Biden’s Budget Plan, Which Would Raise $24 Billion
Reports indicate (1) that the new budget plan proposed by US Vice President Joe Biden could end the practice of tax loss harvesting on cryptocurrency transactions.
A spokesperson from the White House has stated that the budget, which is scheduled to be unveiled later today, will include a tax measure designed to restrict the trading of wash sales of cryptocurrencies. Wash sales trading is a tax loss harvesting exploit that enables a distinctive technique.
Cryptocurrency investors engage in this trading practice. Investors who suffer a loss on the sale of any digital currency can deduct that loss from their taxable income.
Upon completing these steps, these crypto investors can buy the same quantity and volume of digital currency from the market once more.
According to several reports, Biden’s suggested budget could earn as much as $24 billion.
This is not the state capital’s first attempt to eliminate the loophole that allows investors to claim a loss just to repurchase the same cryptocurrency, as this recent development demonstrates. In September 2021, representatives from the federal government submitted a bill that would address the same problem.
However, Ivory Johnson, founder of Delancey Wealth Management and a qualified financial planner, has claimed in the past that the bill does not apply to their industry.
According to Johnson, digital currencies were sufficiently different, so swiftly selling Bitcoin and buying Ether would not be considered a violation of the rules.
Around that time period, the founder of Delancey Wealth Management also stated:
They only have in common that transactions are recorded on a distributed ledger or blockchain. Using this line of reasoning, stocks traded on an exchange, whether the NYSE or another exchange, cannot be deemed the same.
Simply said, Bitcoin is to Ether what Gold is to Visa; they are not substantially similar and, in my opinion, should not trigger the wash sale rule because of this.
Bidens Budget on Crypto transactions
The proposed budget for the next FY of the United States under the president’s leadership tries to provide specific insight into his financial objectives. One of the most important goals is to cut the deficit by as much as $3 trillion over the next decade.
Nonetheless, the United States Congress must first examine every budget proposal before it can be delivered to Vice President Biden for his signature.
In the current state of affairs, it is highly doubtful that Biden’s proposal will get any traction with legislators because Republicans are likely to oppose several of his plans.
It is also possible that the budget contains ideas that were not passed into law while the Democrats controlled both houses of Congress.
Nonetheless, the budget that will be presented on Thursday could mark the beginning of a protracted negotiation phase among federal MPs.
Officials from the White House have stated that the budget will target huge firms such as those in the pharmaceutical and energy industries.
The Bipartisan Infrastructure Plan, a piece of legislation that pertains to cryptocurrency taxes, has already been signed into law by Biden’s team. In 2021, this piece of legislation, which would eventually become known as the Infrastructure Investment and Jobs Act, was formally enacted into law.
A contentious tax provision that placed certain reporting requirements on brokers that facilitate cryptocurrency transactions was included in the proposed legislation.
Several people at the time believed that the term “broker” was far too broad, to the point where it caused problems for miners. In the meantime, cryptocurrency miners and several other companies do not directly support transactions or acquire personal data like traditional brokers believe they do.