U.S. President Joe Biden’s Proposed Budget to Close Tax Loss Harvesting on Crypto Transactions

The U.S. President Joe Biden is set to unveil his proposed budget, and one of the provisions in it is aimed at closing the tax loss harvesting on crypto transactions.

A White House official has confirmed that the budget will include a tax provision that aims to reduce wash sales trading by crypto investors.

Currently, investors can sell any cryptocurrencies at a loss, claim the loss on their taxes, and then buy the same amount and type of cryptocurrencies again.

According to the Wall Street Journal, this provision would raise up to $24 billion. The proposal is part of the President’s plan to reduce the U.S. deficit by $3 trillion over the next 10 years.

However, any budget proposal would need to pass through the House of Representatives and the Senate before going to the President’s desk for his signature.

This is not the first attempt by lawmakers to close this loophole. In late 2021, they introduced a bill that would similarly prevent investors from claiming a loss only to repurchase the same cryptocurrencies again.

If this budget proposal is passed, it could mean the end of this tax-saving strategy for crypto investors.

President Biden’s team has already passed one crypto tax-related piece of legislation into law. In 2021, the Bipartisan Infrastructure Framework, which later became the Infrastructure Investment and Jobs Act, included a controversial tax provision that would impose certain reporting rules onto brokers facilitating crypto transactions.

However, the definition of “broker” was seen by many in the industry to be overly broad, which could have unintended consequences for entities that don’t directly facilitate transactions or collect personal data from those conducting the transactions.

The U.S. Treasury Department has indicated that it would define the term brokers more narrowly, though it has yet to publish formal guidance on the matter.

While it remains to be seen how this budget proposal will fare in Congress, it signals the Biden administration’s continued interest in regulating the crypto industry.