US House Democrats have proposed closing a tax loophole for cryptocurrency investors by treating digital assets like stocks rather than real estate.
Currently, crypto transactions that lose money can be counted as capital losses, which can reduce the tax burden. Since the Internal Revenue Service (IRS) views digital assets as property, crypto investors can claim the tax benefit of a loss of capital while buying back the digital assets instantly to benefit from a price hike.
However, stocks and stocks are subject to a short sale rule that prevents taxpayers from claiming tax losses while retaining some of the assets that caused the losses. Investors cannot buy identical securities within 30 days and deduct the loss from their tax burden.
In a snapshot of tax reforms published by the House Ways and Means Committee, Democratic lawmakers are now proposing to bundle digital assets, raw materials and currencies in the “laundry sale” provision. The joint tax committee estimates the change would generate additional tax revenue of $ 16.78 billion over the next 10 years.
Forbes notes that the proposed change would not prevent crypto investors from adding “unjustified losses” from a wash sale to the base price of the digital asset they invested in.