Trump’s Proposed Tax Changes Could Impact Cryptocurrency Investors
As the Trump administration nears a historic overhaul of the U.S. tax code, cryptocurrency investors should be on high alert for changes that could impact their holdings. As it turns out, both versions of the new tax bill include tidbits that could impact holders of bitcoin and other cryptocurrencies.
As a refresher, the House of Representatives and Senate have each passed their own versions of the tax bill. Though considerable overlap exists, there are important differences that need to be reconciled.
Tax Impact on Crypto Investors
Neither versions of the proposed tax legislation make any direct mention of cryptocurrencies, but they do peel back the so-called “like-kind” exchange that many investors used previously. Under the proposed legislation, like-kind exchanges apply to real property only, which excludes cryptocurrency.
This essentially means that the new bill will remove the ability to defer capital gains taxes on property by switching one asset for another, similar asset. This provision was a boon to crypto investors, who could take advantage of the swap.
Meanwhile, the Senate version is looking to implement a first-in, first-out (FIFO) framework, which could make it more arduous to report back on crypto holdings.
Both versions of the bill are promising major tax cuts to the tune of trillions of dollars spread out over a decade. This includes a permanent 15 percentage point cut to the corporate tax rate and temporary reductions for individual tax brackets. President Trump has also pushed hard to reform international tax rules and create more leeway for U.S. multinationals to repatriate their profits.
Cryptocurrency Tax Fairness Act Left Out of Bill
Bitcoin investors may be disappointed to learn that the Cryptocurrency Tax Fairness Act was omitted from both versions of the bill. The Act, which is co-sponsored by Arizona Republican David Schweikert, promised to create a de minimis exception for crypto payments below $600. This provision would have applied after Dec. 31.
The text of the bill stipulated that:
“Gross income shall not include gain from the sale or exchange of virtual currency for 5 other than cash or cash equivalents….[if the amount of gain excluded from gross income under subsection (a) with respect to a sale or exchange shall not exceed $600.”
Schweikert is also a member of the Congressional Blockchain Committee, which focuses on crypto regulation, and the Ways and Means Committee, which is concerned with taxation.
The new Republican tax bill, if passed, would be implemented Jan. 1, 2018. If the process is delayed, there’s still a change that the new tax code will be retroactive back to Jan. 1. President Trump had previously vowed to pass tax reform in time for Christmas. That leaves very little time left before Washington shuts down for the holidays.
Crypto investing has exploded in the United States, with San Francisco-based CoinDesk registering more than 13 million trade accounts. This includes more than 100,000 signups during Thanksgiving weekend.
Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
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