Crypto Tax Loophole Worth $23.5 Billion Faces Closure

Congress has proposed a new bill to close a tax loophole worth $23.5 billion, which has been exploited by crypto traders for years.

The 'Applying Existing Tax Anti-Abuse Rules to Digital Assets Act' would extend the Internal Revenue Code's wash sale rules to cover digital assets, effectively ending one of the last major tax advantages unique to crypto.

The wash sale rule prevents stock investors from claiming a loss on their taxes if they buy back the same stock within 30 days. However, crypto traders have been able to exploit this loophole by selling Bitcoin at a loss and immediately buying it back, allowing them to offset their tax bill.

The proposed legislation would mirror the treatment of stocks and other traditional financial instruments, disallowing losses claimed on digital asset sales if a 'substantially identical asset' is repurchased within 30 days.