Democrats in the US House of Representatives have proposed tax initiatives to fund a $3.5 trillion spending package that could potentially affect cryptocurrency users.
According to a document released Monday by the House Committee on Ways and Means, the proposal would raise the tax rate on long-term capital gains from the current 20% to 25% for "certain high-income individuals." An additional tax of 3.8% on net investment income would ostensibly apply to the proposed changes, raising the U.S. capital gains and dividend tax rate to 28.8% for wealthy cryptocurrency users.
In addition, the tax plan would add digital assets to the "wash sale" rules, which prohibit investors from claiming capital gains deductions on certain assets repurchased within 30 days of sale, "previously applied to stocks and other securities." Existing IRS tax rules consider cryptocurrencies to be property in a wash sale - which some crypto users may have used to avoid capital gains - while a proposal by U.S. lawmakers would close that loophole.
If passed and signed into law, the plan would require cryptocurrency users to report taxes under the new wash sale rules starting Dec. 31, while the capital gains tax rate would apply to transactions made after Sept. 13. The $3.5 trillion spending package has not yet been finalized. In April, President Joe Biden's administration suggested raising the capital gains tax rate for the wealthy to 43.4%.