There are rumors circulating that the government of VP Joe Biden plans to apply the wash sale law to digital currencies.
Because of this, a technique of trading where a dealer moves virtual currency for the purpose of avoiding taxes and then immediately obtains more identical assets would be rendered invalid.
There are a few surprises in store for crypto traders and buyers alike in the next budget proposal that will be announced by V.P. Joe Biden of the USA.
Among these shocks is a plan to suggest double-cap gains for some investors and a restriction on wash sales of cryptocurrencies.
On March 9, the budget plan that the Biden administration intends to use for the financial year 2024 is likely to be made public.
It has been said that the objective of this strategy is to reduce the deficit by about three trillion dollars during the span of the subsequent ten years.
According to several sources in the news, it also includes revisions to the tax affairs of coins with the intention of raising around $24 billion in revenue.
One of these ideas reportedly involves putting a stop to a strategy that is known as “tax-loss harvesting,” which means gathering tax losses.
This refers to the situation in which a crypto dealer offers assets at a loss with the intention of reducing the amount of income that is subject to taxation, and then quickly purchases those assets again.
Crypto Wash Sales
When it comes to the bond and stock markets, engaging in this sort of strategy is prohibited because of the regulations that are now in place governing wash sales.
Cryptocurrency, on the other hand, is exempt from these regulations at the moment since its underlying assets are still not classified as securities.
It would appear that current efforts are being made by the US government to change that. They are trying their best to change the policies pertaining to cryptocurrencies.
The government alongside the regulatory authorities has already started working on changing the classification. It seems that the US SEC has been tasked with changing the classification of cryptocurrencies.
It has been fighting with several crypto firms in court claiming that the particular crypto projects are securities. If things fall in favor of the US SEC, then they will be able to generalize the winning decisions over the entire crypto industry.
Danny Talwar Interview
Danny Talwar, CEO of the bitcoin tax software startup Koinly, was recently interviewed by the Crypto Exchange
Throughout the course of the conversation, he offered his opinions as follows:
This issue cannot be avoided for the United States, and if it is resolved, it will place the nation on an equal footing with other nations. Such nations include nations like Canada and Australia.
Countries like Canada and Australia allow for the practice of crypto wash sales. This is an unavoidable aspect that must be taken into account by the U.S.
If the guideline is implemented, the length is significant because of the large number of cryptocurrency owners who were able to break into the crypto field.
He went on to say that market tops are suffering from significant losses.
Several crypto investors who got into the area on the strength of 2021’s market peaks have been forced to endure significant losses.
The current rate of the capital gains corporation tax for investors who make no less than $1 million would be increased to 39.6% under the Biden budget plan.
This is an increase from the current rate of 20%.
This would roughly quadruple the tax burden that these people now have to bear on their long-term investments.
It has been reported by a variety of credible sources that the government is working on a proposal to raise the amount of income tax paid by corporations and wealthy individuals.