In the USA, the Joe Biden administration is introducing a 30 percent crypto mining tax in its new budget proposal. The Biden administration has announced its proposed budget for 2025, which includes provisions to implement a number of regulatory measures targeting cryptocurrency assets. The proposed rules are expected to generate approximately $10 billion in additional tax revenue by 2025.
The USA will close the gaps in the cryptocurrency field!
The new budget proposals specifically target a loophole that previously allowed wealthy cryptocurrency investors to disproportionately benefit. The administration wants to close this gap, thus aiming to create a more level playing field for all investors. It also aims to increase tax justice. The measure is part of a broader effort to adapt the country’s tax code to the modern age of investment and technology.
The proposals apply sales rules to these assets and address related party transactions. It also modernizes regulations for treating securities loans as tax-free to include other asset classes. Thus, it includes a comprehensive approach to digital assets. These steps are designed to update the tax system to reflect the unique characteristics and challenges of digital asset transactions.
Tax for cryptocurrency mining
If implemented, crypto mining companies will have to report the amount and type of electricity they use. In addition, companies must report the value of the electricity used if they purchase it from outside. Meanwhile, miners renting computing capacity will have to report the electricity value of the company renting the capacity to them. This value will then serve as a tax base.
According to the administration, this proposal will be effective for taxable years after December 31, 2024. The government will implement the tax in three stages. These are: 10% in the first year, 20% in the second year and 30% in the third year. The tax will also apply to crypto mining companies that produce their own electricity. Companies that produce or obtain “off-grid” electricity will be required to pay a 30% tax. Here, the base determination will be based on the estimated costs of electricity bills.
Cryptocurrency earnings are on target
Additionally, the budget emphasizes increasing reporting requirements for financial institutions and digital asset intermediaries. This regulation aims to ensure that transactions involving cryptocurrencies are monitored with the same rigor as traditional financial exchanges. Thus, it aims to increase transparency and reduce tax evasion opportunities. The government will also require certain taxpayers to report their foreign digital asset accounts. Thus, it plans to expand the scope of US tax compliance efforts internationally.
Financial details
According to the document, the application of wash sale rules to digital assets is expected to bring in over $1 billion in tax revenue in fiscal year 2025 alone. The budget also states that the inclusion of digital assets in mark-to-market rules, which require securities to be taxed on their current market value rather than their purchase price, is expected to generate $8 billion in additional revenue in the same year.
The proposal also imposes an excise tax on crypto mining activities. This consumption tax is estimated to reduce the national deficit by approximately $7 billion. Similar tax provisions were included in last year’s budget. However, it faced legislative obstacles and Congress did not pass it.
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