Congress Revives Bid to Close Crypto Tax Loophole

Congress is reviving efforts to close a tax loophole that lets cryptocurrency investors claim losses without selling their holdings. The proposal, led by Representative Jodey Arrington, would apply wash sale rules to digital assets, generating nearly $24 billion in revenue over ten years, according to the Treasury Department.

The bill aims to end the practice of tax-loss harvesting, which allows crypto investors to sell at a loss, claim the deduction, and quickly repurchase the same asset without losing the benefit. This treatment differs from stocks and securities, which are subject to wash sale rules that block the tax benefit if the investor buys the same or similar asset within 30 days.

Support for changing this treatment appears to extend beyond one lawmaker. Representative Ron Estes of Kansas said extending wash sale rules to digital assets would ensure consistency and clarity for investors and traders.