Joe Biden aims to raise crypto taxes and ban wash sales
The U.S. government plans to raise capital gains taxes and crack down on sham transactions in the crypto sector.
The U.S. government plans to raise capital gains tax and crack down on sham transactions in the crypto sector.
According to a Bloomberg report, the sitting U.S. administration, in its new budget plan, envisions a slate of tax hikes for billionaires, corporations, and wealthy investors. According to the report, President Joe Biden proposes a minimum tax rate of 25 percent for billionaires and suggests nearly doubling the capital gains tax that also affects crypto, from 20 percent to 39.6 percent. Additionally, the corporate tax would be raised from 21 percent to 28 percent.
In addition, the so-called wash sale rule would be extended to crypto. The aim of the wash-sale rule is to prevent a strategy where investors sell assets at a loss to save on taxes, the so-called tax-loss harvesting, only to buy them back immediately. In the U.S., such an approach is illegal for stocks and bonds, while in other countries it’s a gray area for both stocks and cryptocurrencies, where people quickly cross into illegal territory due to market manipulation.
Because cryptocurrencies in the U.S., however, are not clearly classified as securities, they don’t fall under this regulation yet—Biden wants to change that. For many American investors, such a change could have far-reaching consequences, because they’ve suffered heavy losses in the crypto bear market and wouldn’t be able to claim them tax-wise if Biden’s proposal passes.
Limited chances for Biden's tax changes
The Biden administration’s goal includes narrowing the federal budget deficit via the tax changes and saving more than three trillion U.S. dollars over the next decade. Additionally, besides higher taxes on the rich, several of former President Donald Trump’s tax reforms must be rolled back.
Bloomberg says Biden plans to present the proposals for the tax changes to Congress today. With Republicans controlling the House, it’s unlikely he’ll win a majority.
Meanwhile, Ripple and the U.S. SEC are in a heated battle. The final court ruling is not likely to be long in coming. The outcome could be positive for Ripple and the crypto market as a whole. A ruling against Ripple, however, could harm confidence in the crypto market.
