How Congress Will Close the Crypto Tax Loophole.

    How Congress Will Close the Crypto Tax Loophole. But time is running out for investors to take advantage of it. Congress is considering introducing some big changes to the tax code to help raise money for President Biden's $3,5 trillion social infrastructure spending plan. The proposals include a change to the wash sale rule to include cryptocurrencies. The wash sale rule prevents investors from selling and repurchasing a security to show tax loss on the investment, the proposal extends the rule to include "commodities, currencies and digital assets."

Working State Of The Loophole

Cryptocurrency investors who bought and held assets such as Bitcoin (CRYPTO:BTC) for the long term had a great opportunity earlier in the year. They were able to sell it at a high price and buy it again at a low price. Cryptocurrency trading still works this tactic even if some Bitcoin is purchased below the current transaction price.

How Congress Will Close the Crypto Tax Loophole.

  So, as long as some Bitcoin is purchased above its current price, this tactic can be used to lower your taxes in the current year. A capital loss may occur during the year when the purchase and sale transaction is made. If there is no capital gain to cover this, the loss for this balancing can be spread over several years. In other words, it increases the future while reducing its tax liability this year.

Why is Congress closing the loophole?

Congress seeks to increase tax revenue for Biden's $3.5 trillion social infrastructure plan. It is a fact that the tax loss harvest reduces current tax revenue, even if it potentially offsets this lower tax in the future, which investors actually sell. It is known that there are many investors who benefit from this. But Congress needs the money now. While there is still an opportunity for investors to take advantage of the current method of taxing Cryptocurrency, they should expect this gap to close in the near future as Congress changes the tax code.  

Source: The Motley Fool

 

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