Biden Administration Proposes Doubling Crypto Tax Rate and Wash Sale Rule

• The Biden administration is looking to impose new rules on crypto taxation, including the wash sale rule and doubling capital gains taxes.
• The proposed wash sales rule would prevent tax-loss harvesting by preventing investors from selling assets at a lower price for a deductible loss and then repurchasing them soon after.
• The budget proposal will also double the tax rate on capital gains from crypto, as well as increase income levies on corporations and wealthy Americans.

New Crypto Tax Rules Proposed by Biden Administration

The Biden administration is proposing changes to the current crypto tax regime that includes imposing a wash sales rule and doubling the capital gains taxes for certain investors. This budget plan for the 2024 fiscal year is scheduled to be released on March 9th. Additionally, there are plans to raise around $24 billion through these changes.

Wash Sales Rule

The proposed wash sales rule is being considered in order to prevent tax-loss harvesting in which an investor would sell their assets at a lower price for a tax-deductible loss and then repurchase those assets soon after. Since digital assets have not been officially classified as securities, they are currently not covered under this rule; however, if this proposal passes, it will include digital assets too.

Doubling of Capital Gains Taxes

The upcoming budget proposal also aims at doubling the capital gains taxes on long-term investments in cryptocurrency from 20% (for investments of minimum of $1 million) to 36.9%. Furthermore, income levies on corporations and wealthy Americans could also be increased under this budget plan.

IRS Expansion of Crypto Taxation Scope

In February 2021, the IRS expanded its scope when it comes to cryptocurrency taxation by making reporting compulsory for everyone who has ever dealt with digital assets regardless of whether or not any profits were made off those transactions. Therefore all traders must now report any crypto activities even if they incurred losses.

Possibility of NFTs Being Taxable

Finally, there is speculation that Non-Fungible Tokens (NFTs) might become taxable due to some exchanges being classified as stockbrokers under U.S law; however nothing has been confirmed yet regarding this matter by authorities involved with taxation laws