Congress Targets Crypto Tax Loophole Worth Billions
Lawmakers are pushing to close a lucrative tax loophole for cryptocurrency investors that could bring in nearly $24 billion over a decade. The exemption, which allows crypto investors to claim a tax benefit for an investment loss without divesting the holding from their portfolio, is not subject to wash sale rules like traditional assets.
The tax code treats digital assets like Bitcoin and Ether as property, rather than securities, meaning they don't fall under existing wash sale rules. This loophole has been 'widely used' by crypto investors, said Troy Lewis, a certified public accountant and professor of accounting and tax at Brigham Young University.
Rep. Jodey Arrington's legislation, the Applying Existing Tax Anti-Abuse Rules to Digital Assets Act, aims to eliminate this exemption by subjecting crypto transactions to wash sale rules. The bill would also extend existing rules to digital assets, ensuring consistency and clarity for investors and traders.