U.S. House Democrats Want To Close Tax Loophole for Crypto Investors

Democrats in the U.S. House of Representatives have proposed closing a tax loophole for cryptocurrency investors by treating digital assets like stocks rather than property.

Currently, crypto transactions that lose money are allowed to be counted as capital losses, which can then lower tax burdens.


Because the Internal Revenue Service (IRS) views digital assets as property, crypto investors can claim the tax benefit from a capital loss while also immediately buying back the digital asset to capitalize on any price upswings.

Stocks and securities, however, are subject to a “wash sale” rule which prevents taxpayers from claiming tax losses while still retaining an interest in the asset that caused the losses. Investors can’t buy identical securities within 30 days and still deduct the loss from their tax burden.

In a tax reforms outline issued by the House Ways and Means Committee, Democrat lawmakers now propose lumping digital assets, commodities, and currencies together in the “wash sale” provision.

The Joint Committee on Taxation estimates that the change would raise an additional $16.78 billion in tax revenue over the next 10 years.

Forbes notes that the proposed change wouldn’t prevent crypto investors from adding “disallowed losses” of a wash sale to the cost basis of the digital asset they invested in.

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Featured Image: Shutterstock/Pozdeyev Vitaly

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