Joe Biden Plans To Increase Taxes On Crypto And Prohibit Wash Sales

The US government plans to increase the capital gains tax while the crypto sector is being watched more and more by governments and authorities.

As per a Bloomberg report, the current US government has devised a new budget plan that includes several tax hikes for billionaires, corporations, and affluent investors.

Joe Biden, the US President, aims to establish a minimum tax rate of 25 percent for billionaires and suggests almost doubling the capital gains tax, which applies to cryptocurrency as well, from 20 percent to 39.6 percent. Moreover, the corporate tax rate is predicted to increase from 21 percent to 28 percent.

Moreover, the so-called Wash-Sale rule is expected to be extended to cryptocurrencies. The Wash-Sale rule aims to prevent a strategy where investors sell assets at a loss to save taxes, known as Tax-Loss Harvesting, only to buy them back immediately afterward.

Since cryptocurrencies are not currently unambiguously classified as securities in the US, they are not subject to the Wash-Sale rule. However, Biden intends to modify this, and if his proposal is successful, it could have significant implications for numerous US investors who have incurred substantial losses in the cryptocurrency bear market. They would no longer be eligible for tax deductions if the rule is extended to include cryptocurrencies.

One of the objectives of the Biden administration is to decrease the budget deficit of the US government and generate savings of more than three trillion US dollars in the next decade, primarily through tax reforms.

As per Bloomberg, Biden intends to submit the tax reform proposals to Congress. Nonetheless, since the Republicans hold the majority in the House of Representatives at present, the likelihood of him garnering sufficient support for the plan seems low.