House Democrats Planning to Hike Tax on Crypto Assets in Infrastructure Bill
The trillion-dollar infrastructure bill has moved to the House to pass, and after fighting and losing in the Senate, another big fight is at the crypto industry’s door.
Citing sources with the knowledge of the plans, Politico reported that Richard Neal, chairman of the House Ways and Means Committee, is the one preparing to add these measures.
On Monday, House Democrats released a package of proposed tax increases to help pay for the White House's $3.5 trillion spending package. Part of the $2 trillion tax hike is a proposal to add currencies, commodities, and crypto assets to the wash-sale rule, which is estimated to raise about $16 billion over a decade. The Ways and Means explainer document notes,
“This section includes commodities, currencies, and digital assets in the wash sale rule, an antiabuse rule previously applicable to stock and other securities. The wash sale rule in section 1091 prevents taxpayers from claiming tax losses while retaining an interest in the loss asset. The amendments made by this section apply to taxable years beginning after December 31, 2021.”
Under US rules, a taxpayer can’t deduct the losses from wash sales which is defined as when a security is sold and within 30 days, “substantially identical” security is then purchased. Cryptocurrencies aren't currently subject to these rules.
The document further talks about applying constructive sales rules to digital assets, “anti-abuse rules previously applicable to other financial assets.” This rule treats “the adoption of certain offsetting positions to previously owned positions as sales of the previously owned position,” preventing taxpayers from “locking in investment gains without realizing taxable gain.”
House Democrats are also targeting wealthy Americans by proposing raising the tax rate on capital gains and qualified dividends to 28.8%, applied to stock and other asset sales that occur after Sept. 13, 2021.
According to this, starting next year, taxpayers would incur a top federal rate if their taxable income exceeds $400,000 (single), $425,000 (head of household), and $450,000 (married joint), in line with the Biden administration pledging to not raise taxes for households making less than $400,000.
The bill is expected to be revealed before the end of the month.