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House Democrats on Monday proposed legislation that would close a tax gap for cryptocurrency investors.
The bill would impose “wash sale” rules on commodities, coins and digital assets, according to a scheme issued by the House Ways and Means Committee.
This means that Bitcoin, Ethereum, Dogecoin and other popular cryptocurrency investments would be subject to anti-abuse rules, which apply to stocks, bonds and other securities.
Lease sale rules prevent investors from obtaining tax benefits by losing the investment and immediately repurchasing the same asset.
The IRS treats cryptography as a property, not as a security, which is how the asset class escapes the rules.
As a result, investors in cryptography get two advantages: they can sell crypto for losses and claim a tax profit. (This loss can reduce or eliminate capital gains tax on winning investments.) Then, they can quickly recover the cryptography they sold to capture any price rebound, which is not unreasonable given the volatility of the cryptocurrency.
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In comparison, stock investors are not allowed to buy an identical or similar value within 30 days before or 30 days after the sale without causing penalties.
The House Democrats proposal would apply to sales after December 31, 2021.
According to estimates released Monday by the Joint Tax Committee, subjecting cryptocurrencies and other assets to sale rules would increase $ 16.8 billion in a decade.
The move comes amid a series of tax reforms that Democrats are proposing to raise money for climate investments and a major expansion of the U.S. social security network, which is expected to cost up to $ 3.5 trillion.
The overall tax reforms for businesses and individuals outlined Monday will raise nearly $ 2.1 trillion in a decade.