- Cryptocurrency traders could be banned from offsetting some capital losses against their gains thanks to a proposal from House Democrats
- Lawmakers want to change the ‘wash-sale’ rule so that traders cannot buy an asset back within 30 days of a losing sale and still offset the loss
- Democrats hope the rule change, which will also apply to commodity and currency traders, will net the $16 million over 10 years.
U.S. lawmakers are planning a second change in tax provisions that could see cryptocurrency traders unable to offset a certain kind of trading loss against their tax bill. House Democrats yesterday released a tranche of proposed tax increases to help pay for the Biden administration’s $3.5 trillion spending package, which includes adding commodities, currencies and cryptocurrencies to the ‘wash-sale’ rule. The rule prevents traders from claiming a capital loss on a trade if they buy that same asset back within 30 days and would allegedly raise an estimated $16 billion over a decade.
Cryptocurrency Industry Gets Another Blow
The cryptocurrency industry in the U.S. is still reeling from the fallout from the Infrastructure Bill, which could see massive unfair changes to the way that certain kinds of cryptocurrency activities are regulated, and now traders are being targeted in a new round of changes. Currently, if a cryptocurrency trader sells a coin for a loss he is allowed to buy the same coin back within 30 days and still offset that loss. However, the amendment to the rule would close that loophole, making cryptocurrency traders, as well as currency and commodities traders, unable to claim the loss off their tax bill if they buy the same asset back within 30 days.
To claim the deduction for a loss, traders must wait at least 30 days before buying the asset back or making another investment that gives them an equivalent exposure. If they buy back within that period, the transaction is considered a wash sale and is ineligible for a capital-gains deduction.
Politicians Looking For New Ways to Fund Spending
Given that the Internal Revenue Service classifies cryptocurrency as property, cryptocurrency investors and traders have not been subjected to that rule, but this could be set to change as Democrats try and find new and ever more inventive ways to raise money for their massive spending plans.
Such a rule change would have a massive impact on professional traders who would find their livelihoods massively impacted.