U.S. President Joe Biden has proposed a budget that aims to close tax loss harvesting on crypto transactions, a move that could raise up to $24 billion.
Under the current system, crypto investors can sell cryptocurrencies at a loss, claim the loss on their taxes, and then buy the same amount and type of cryptocurrencies again. The new provision would prevent investors from taking advantage of this strategy and reduce wash sales trading.
According to a White House official, the proposed budget will also lay out Biden’s fiscal priorities and lower the U.S. deficit by $3 trillion over the next decade.
However, the budget will need to pass through the House of Representatives and the Senate before it can be signed into law by the president.
This is not the first time Washington has attempted to close the loophole. Lawmakers introduced a bill in late 2021 to prevent investors from claiming a loss only to re-purchase the same cryptocurrencies.
In 2021, the Biden administration passed the Bipartisan Infrastructure Framework, which included a tax provision that imposes certain reporting rules on brokers facilitating crypto transactions.
The definition of “broker” was deemed to be overly broad, potentially including entities that don’t directly facilitate transactions or collect personal data from those conducting transactions. The U.S. Treasury Department has yet to publish formal guidance on the matter but has indicated it would define brokers more narrowly.