On March 9th, US President Joe Biden is expected to reveal a new budget plan that includes changes to crypto taxation aimed at raising $24 billion. The proposed policy is focused on addressing wash trading in cryptocurrencies and could potentially tax non-fungible tokens (NFTs). Those who deal with digital assets will be required to report their activities to the Internal Revenue Service (IRS).
The changes are expected to apply to crypto trading, where wash trading is currently not regulated in the same way as it is in stock and bond trading. If the new policy is implemented, investors will not be able to sell certain investments and claim a tax-deductible loss before reinvesting, which is considered illegal practice in traditional trading.
While some traders, such as DivXMan, are optimistic that the updated rules could incentivize holding Bitcoin in the long term, others, like Nagato, remain skeptical of the potential impact. The updated crypto tax policy proposed by Biden could face opposition from the Republican party. Regardless, the recent expansion of crypto tax rules by the IRS means that anyone dealing in cryptocurrencies must report their activities.
While Biden’s changes are not guaranteed to come into effect, the Internal Revenue Service (IRS) recently expanded the scope of crypto tax rules in February 2023. These changes require anyone who has dealt in cryptocurrencies to report their activities.
Another report suggests that Non-fungible tokens (NFTs) could be taxed. According to a recent third-party survey by CoinLedger, only 58% of the survey participants have included cryptocurrency on their tax reports in 2022.
This means if you buy a digital asset, it crashes, and you sell, then buy it or a similar asset/derivative within 61 days at equivalent value; you can’t claim a taxable loss on the sale. Overall this is a good thing. It incentivizes holding Bitcoin long term vs risky trading.
Nagato, a crypto trader and analyst, took the development with a grain of salt. The technical expert believes words like “propose” and “expect” matter less than action. Biden’s updated crypto tax rules could face rejection by the Republicans.
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