Well, the 4,000+ page text for the government funding bill, more commonly known as the omnibus, has been released, and while I am sure there are plenty of interesting tidbits, one key thing stands out among the rest. The biggest tax loophole in the crypto space right now has appeared to survive the last round of legislation for this 117th Congress. Called a wash sale this type of trade is "one that occurs when an individual sells or trades a security at a loss and, within 30 days before or after this sale, buys the same or a substantially identical stock or security, or acquires a contract or option to do so".
Currently, crypto does not have a wash-sale rule or tax like every other asset has! This means that you can sell your crypto at a loss, capture the tax benefit for that loss, rebuy it and then sell it for a gain without penalty! The wash sales little caveat has been a target of legislation for most of this year but amazingly continues to survive against all odds! Prior legislation that had been targeting this actually would have used the money captured by closing this loophole to address environmental needs but now that funding is going to come from somewhere else.
This is the last week of the 117th Congress as the new year marks the beginning of the 118th Congress. All legislation that is not passed and signed into law before the new Congress will have to be resubmitted and begin the whole legislative process again. Since the Republican party will be in power in the House new rules will be implemented that could in theory impact legislation like this. Priorities as well will change meaning that the next Speaker of the House may not bring legislation like this to the Hosue floor for a vote as is their right. This buys the crypto lobby and the US public additional time to fight back against this tax being implemented for the crypto industry. In the long haul, I am not so sure that this will be prevented. Still, hopefully, crypto can continue to be exempt until whatever regulation is enacted and this can serve as a bargaining chip to prevent over-regulation.
For now though with the current market so much lower than it previously was traders can sell, take the tax credit and rebuy the asset. This tax credit, up to $3,000 of it, can be rolled over for the next few years as well allowing for future gains to be mitigated. With the markets so beat up and many people losing money it will be a present gift from the government to cut people bigger refunds for this god-awful trading year.
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