Some US Democrats have proposed tax initiatives to fund a $3.5 trillion spending portfolio. The move could potentially affect crypto users.
A document released by the House Committee on Ways and Means on Monday revealed that the proposal would increase the tax rate on long-term capital gains from the existing 20% to 25% for “certain high income individuals.” A tariff of 3.8% on net investment income would also apply to the proposed change, bringing the US capital gains and dividends tax rate to 28.8% for wealthy crypto users.
Furthermore, the tax plan will include digital assets to the “wash sale” rules. This will prevent investors from claiming capital gains deductions on certain assets repurchased within 30 days of a sale, a privilege previously enjoyed by stocks and other securities.
Under existing tax laws cryptocurrencies are classified as properties in wash sales. Some crypto investors have used this avenue to avoid capital gains. However, the proposal from US lawmakers will close this loophole.
If the proposed bill is passed and signed into effect, it would require crypto users to report taxes according to the new wash sale rules starting on Dec. 31. The capital gains tax rate would go into effect after Sept. 13.
Recall that the crypto community is already battling with the ambiguous definition of the term "broker" in the infrastructure bill. This could add another dimension to the ongoing struggle.
Nevertheless, the bill for the $3.5 trillion spending package has not been finalized. President Joe Biden’s administration introduced the bill in April to raise the capital gains tax rate for wealthy individuals to 43.4%.