According to a report by the Wall Street Journal on March 8, President Joe Biden is set to unveil changes to crypto taxation in an upcoming budget plan. These changes are expected to target wash trading, which is currently a loophole in cryptocurrency trading that allows investors to sell certain investments and accept a tax-deductible loss before reinvesting. Biden’s proposed tax rule changes will close this loophole and bring cryptocurrency taxation rules in line with the stock and bond trading markets.
Joe Biden’s new crypto tax policy aims to raise $24 billion
U.S. President Joe Biden’s upcoming budget plan includes changes to crypto taxation, which could raise as much as $24 billion. The proposed tax policy aims to cut federal budget deficits by $3 trillion over a decade. However, the plan may face challenges as it requires the approval of the Republican party, which currently holds the majority in the House despite Biden’s Democratic leadership and a Democratic Senate.
The proposed changes target wash trading, a practice that is currently not subject to crypto taxation rules. Investors use this illegal technique to sell certain investments and claim tax-deductible losses before reinvesting. By applying rules against wash trading to cryptocurrency trading, the government seeks to prevent tax evasion and raise revenue.
The new budget plan, which includes the crypto tax policy, is set to be released on Thursday, March 9.
Other recent tax policy changes affecting crypto investors in the U.S.
In addition to Biden’s proposed changes, other recent tax policy updates will impact crypto investors in the United States during the current tax season. In February, the IRS expanded the scope of its crypto tax regulations. Under the new rules, anyone who has engaged in transactions involving digital assets must now report their activities. This includes buying and selling cryptocurrencies, as well as receiving them as payment or earning them through mining. Failure to comply with these regulations could result in penalties and legal consequences for crypto investors.
Tax policy changes and new regulations are requiring crypto investors to report all cryptocurrency activities to the IRS. Non-fungible tokens (NFTs) could be taxable, according to some reports, and some cryptocurrency exchanges began to provide 1099-B forms to their users in 2022, providing crypto investors with more information to report to the IRS. However, according to recent surveys, many crypto investors still have not included crypto transactions on their tax reports. In fact, only 58% of those surveyed by CoinLedger included cryptocurrency on their tax reports in 2022. This shows that many investors need to catch up with the latest tax regulations and ensure they are reporting all of their crypto transactions correctly.
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