In Washington, discussions have begun among Republicans about potential tax changes for the coming year. The focus is on "budget reconciliation" and extending provisions of the Tax Cuts and Jobs Act. If Congress implements significant tax changes, there is a call for cryptocurrency to be included in these discussions, especially if it contributes to federal revenue.
Budget reconciliation allows major federal legislation related to taxes and spending to pass with a simple majority in Congress, bypassing the 60-vote threshold in the Senate. This process often involves debates about government revenue loss due to tax cuts and proposals to raise revenue to offset this loss.
The crypto community recalls frustrating experiences with previous legislative changes, such as redefining "broker," which could impose reporting requirements on non-custodial wallets and miners. This provision was part of an infrastructure bill intended to raise revenue.
Congress is considering measures like applying "wash sale" rules to crypto transactions. These rules prevent taxpayers from claiming losses when they repurchase assets shortly after selling them. While treating digital assets like traditional finance is considered prudent, there are calls for fair treatment rather than using cryptocurrency solely as a revenue source.
Several bipartisan measures could be enacted next year:
- The Virtual Currency Tax Fairness Act extends foreign currency tax exemptions for low-value personal transactions to cryptocurrencies.
- The Providing Tax Clarity for Digital Assets Act clarifies that taxes on block rewards are due upon disposition of newly created coins.
- The Keep Innovation in America Act addresses broker definitions and repeals Section 6050I, which mandates reporting crypto transactions over $10,000 without a warrant.
- The Safe Harbor for Taxpayers with Forked Assets Act offers safe harbor when IRS guidance is unclear.
- Removing appraisal requirements for crypto donations to charities when exchange data can determine prices.
Coin Center has advocated for these provisions and appreciates efforts by Senators Ron Wyden and Mike Crapo of the Senate Finance Committee. There is optimism that positive cryptocurrency policy improvements will occur in the coming years, particularly regarding taxation.
