According to recent reports, US President Joe Biden’s budget plan may affect crypto investors. According to a recent Wall Street Journal report, US President Joe Biden will propose changes to cryptocurrency taxation in an upcoming budget plan. Here are the details…
Biden’s budget plan will target “wash trading”
Biden’s budget plan could directly impact crypto investors. The Wall Street Journal says the US President will propose a change in crypto taxation rules to target wash trading. While the rules against wash trading apply to stock and bond trading, these rules are not currently applied to cryptocurrency trading. This means that investors can sell certain investments and accept a tax-deductible loss before reinvesting. However, this is an illegal practice that the government undoubtedly wants to prevent.
Wash trading is a process in which a trader buys and sells securities in order to mislead the market. In some cases, “wash-out” transactions are carried out by a cooperating trader and a broker, and in other times, these transactions are carried out by investors acting as both buyers and sellers of the security. In terms of cryptocurrencies, the process is as follows: a strategy in which a crypto trader sells assets at a loss for tax purposes, known as a tax loss “harvest,” and then repurchases them immediately. Danny Talwar of crypto tax software firm Koinly commented:
This is an inevitable consideration for the US and if implemented, it will be on par with other jurisdictions such as Canada and Australia where crypto wash sales are valid. If the rule is enforced, timing is very important. Because many crypto owners entering the crypto space after the 2021 market peaks are suffering heavy losses.
Cryptocurrency tax policy could bring $24 billion
The new crypto tax policy is expected to bring in $24 billion. It will be part of Biden’s broader 2024 budget plan, which aims to reduce federal budget deficits by $3 trillion over ten years. The proposal may not be successful due to opposition from the Republican party, which currently has a majority in the US House despite Biden’s Democratic leadership and the Democratic Senate. Biden is expected to announce his new budget plan today, Thursday, March 9. The Biden budget also plans to increase the tax rate from 20 percent to 39.6 percent for investors who earn at least $1 million.
It also plans to increase income taxes on corporations and wealthy Americans, according to Bloomberg. While Biden’s changes are not guaranteed to take effect, various other recent tax policy changes are likely to impact crypto investors in the US this tax season. The IRS expanded the scope of crypto tax rules in February. These changes mean that anyone dealing with cryptocurrencies must now report their activities. Other reports suggest that NFTs may also be taxable.
In addition, cryptocoin.com As we reported, some cryptocurrency exchanges began offering 1099-B forms to their users in 2022, providing more information for crypto investors to report to the IRS. Recent third-party surveys by CoinLedger show that many crypto investors do not include crypto transactions in their tax reports when necessary. Only 58 percent of those surveyed confirmed their cryptocurrency investment in tax reports in 2022.
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