How will Biden’s upcoming tax changes impact investors?
Calling all crypto investors! Tax changes are coming and here’s what to do before 2022 to pay fewer taxes.
Last week, the Democrats voted to advance dozens of proposed tax changes as part of Biden’s plan to raise taxes on corporations and high-income households.
While most of the changes would impact high-income households with over $1 million in income, some would impact the broader public. Notably, a change in cryptocurrency taxes.
Understanding tax losses: Investors can use capital losses from losing investments to offset gains from winners. But there’s an exception to this rule:
- Investors use losses to reduce taxes if the asset was purchased within 30 days before or after selling it — known as a “wash sale”.
- Example: If you held a stock that was losing money and sold 15 days after buying it, you couldn’t use the losses to reduce taxes.
What about Cryptocurrencies? Under the current law, these rules don’t apply to cryptocurrencies. Investors are free to sell cryptocurrencies at a loss, repurchase them right away and use those losses to offset taxes on other capital gains.
What’s changing? Under the new proposal, tax rules would extend to cryptocurrencies. According to Jordan Bass, attorney for Taxing Cryptocurrency (via WSJ), investors should sell crypto losers and repurchase them before the end of the year to take advantage of the tax benefits.