Biden’s Proposed Budget Aims to Close Crypto Tax Loopholes and Boost Revenue

President Biden’s proposed budget for 2023 includes measures aimed at reducing tax evasion related to cryptocurrency and increasing capital gains tax rates. These measures address concerns over using cryptocurrencies for illegal activities such as money laundering. One proposed measure targets “wash sales,” where sellers deliberately sell a cryptocurrency asset at a loss to offset gains from other trades and reduce their tax liability. The proposal requires cryptocurrency exchanges to report all wash sales to the IRS to help identify tax evaders. Another proposed measure would increase high-income earners’ capital gains tax rate to 39.6%, eliminating preferential treatment for long-term capital gains. Some cryptocurrency advocates criticize these measures as stifling innovation, while others see them as necessary for regulating the industry. Congress must still approve the proposed budget.

President Biden’s proposed budget for 2023 includes measures aimed at reducing tax evasion related to cryptocurrency and increasing capital gains tax rates. These measures come amid concerns that cryptocurrencies are being used for illegal activities such as money laundering and tax evasion. The use of cryptocurrencies in these activities has become a growing concern for regulatory bodies, given the anonymity and decentralization of these digital assets. One of the proposed measures is aimed at curbing “wash sales” in the cryptocurrency market. A wash sale is a type of transaction where a seller sells a cryptocurrency asset at a loss in order to offset gains from other trades and reduce their tax liability. The proposed budget would require cryptocurrency exchanges to report all wash sales to the Internal Revenue Service (IRS) to help identify tax evaders.

The proposed budget also includes measures to increase the capital gains tax rate for individuals earning more than $1 million per year. Under the current tax code, long-term capital gains (assets held for more than one year) are taxed at a lower rate than ordinary income. The proposed budget would eliminate this preferential treatment for high-income earners and raise the capital gains tax rate to 39.6%, which is the same rate as the top marginal income tax rate. This proposal has drawn criticism from some cryptocurrency advocates, who argue that it will stifle innovation and investment in the industry.

Congress must still approve the proposed budget before it becomes law. However, the inclusion of these measures in the proposal reflects the Biden administration’s focus on regulating the rapidly-evolving cryptocurrency market and ensuring that individuals and corporations pay their fair share of taxes.