Crypto Taxes to Double? Ooft!
Article source, here.
TL;DR
President Biden’s upcoming budget proposal is looking to increase long-term capital gains tax by 2x, and eliminate wash trading from the crypto space.
Capital gains = profits made from selling stocks, crypto, real estate - that sort of thing.
Long-term capital gains = profits made from the above assets, after holding them for at least a year.
Wash trading = selling an asset at a loss (so you can get a tax deduction), then buying it back immediately.
Full Story
The bad news: your tax bill might be about to go up.
The good news: your tax bill might (👇) be about to go up.
(This is all just a big 'maybe' for now - it'll probably get cut to shreds the moment it reaches Capitol Hill).
President Biden’s upcoming budget proposal is a spicy one!
It's looking to increase long-term capital gains tax by 2x (from 20% to 39.6%), and eliminate wash trading from the crypto space.
But hold up! There're a lot of hefty terms in that summary. Let's break 'em down, so we're all across it.
Capital gains = profits made from selling stocks, crypto, real estate - that sort of thing.
Long-term capital gains = profits made from the above assets, after holding them for at least a year.
Wash trading = selling an asset at a loss (so you can get a tax deduction), then buying it back immediately.
Here's an example:
You buy 1 BTC for $50k → BTC drops to $30k → you sell your 1 BTC for $30K (making a $20k loss) → you immediately buy 1 BTC back at $30k.
Which means you get to pay less tax, and still have your Bitcoin (which could still increase in value, in the future).
Wash trading is an illegal practice when you're trading stocks - and in many countries around the world, it's also illegal when trading in crypto.
But in the U.S, it's yet to be banned - which means investors are able to save a good chunk on tax, especially when the markets tank.
From where we're sitting, the proposed ban on wash trading isn't too much of a surprise.
(It's always felt like one of those 'enjoy it while you can' loop holes, that's bound to be axed eventually).
As for the doubling of long-term capital gains taxes?
Yuh. We didn't see that one coming.