The crypto industry is once again staring at the prospect of new tax regulations in the US. Congressional Democrats in the country are proposing a $3.5 trillion spending package, with a provision to raise $16 billion from digital assets through the wash-sale rule.
According to a Bloomberg report, House of Democrats unveiled their plans to finance the $3.5 trillion spending package recently. The lawmakers have pushed for $2 trillion tax hikes, which include $16 billion derived from adding commodities, currencies, and digital assets to the wash sale rule.
Right now, crypto investors in the US have to pay a long-term capital gains tax after cashing out tokens that they’ve held for more than a year. If their holdings are sold in less than a year, they’re required to pay a higher short-term gains tax. As with stock markets, investors are allowed to claim a deduction when they sell their assets at a loss.
However, if they want to repurchase an asset, investors have to wait for 30 days. Failure to comply with this restriction leads to a “wash sale.”
Currently, the Internal Revenue Service defines cryptocurrency as property and therefore does not impose this rule on crypto investors. As a result, digital asset buyers can cash out their holdings, get a deduction, and repurchase cryptocurrencies at lower prices.
For now, Blockchain Association and Coin Center have indicated that they are comfortable with the new proposal. A Spokesperson for Coin Center classified it as “straightforward” and said the group won’t object to its approval.
Meanwhile, Blockchain Association’s executive director Kristin Smith said:
Smith emphasized that it would be better for the industry if taxes on cryptocurrencies are dealt with comprehensively, instead of a piecemeal approach.