The US Government Plans to Eliminate Tax Deductions on Crypto Investment Losses to Reduce Budget Deficits

By Tsunami 03/9/23 6:02 AM

According to the Wall Street Journal, President Joe Biden’s proposed budget for 2024 includes several measures to save money for the federal government, with an estimated savings of hundreds of billions of dollars.

The White House aims to reduce spending on its Medicare program by cooperating with insurance companies, lowering the prices of drugs that the government must purchase to serve the Medicare program, and negotiating drug prices with pharmaceutical companies.

Biden’s administration also intends to increase income tax on investment fund managers and reduce benefits for retirement accounts of the super-rich. Business income tax increases will be applied to companies in the oil and gas sector.

The White House also plans to investigate and collect funds from budget deficits resulting from COVID-19 prevention spending.

One notable proposal is the elimination of tax deductions for losses in cryptocurrency investments. Currently, cryptocurrency investors can sell assets at a lower price than the purchase price, report losses, and deduct taxes up to $3,000, then repurchase cryptocurrency. The investment firm MicroStrategy is said to have taken advantage of this loophole by trading Bitcoin in December, then quickly repurchasing it.

Officials believe that this is not reasonable and should be excluded, similar to the anti-wash trading regulations in the securities market. The US government estimates that eliminating tax deductions for cryptocurrency investment losses could increase budget revenue by $24 billion.

Changes to cryptocurrency taxation regulations have been announced as the US prepares to enter the tax declaration and payment season for the 2022 fiscal year, which typically takes place in March and April. 2022 was a challenging period for the cryptocurrency market, with several chain collapses causing many companies to go bankrupt and leading to a significant drop in the value of many top cryptocurrencies, resulting in losses for many investors.

Conversely, President Biden wants to continue to increase the 2024 defense budget to $835 billion to cope with the conflict in Ukraine and tensions with China. In addition, he proposes a 5.2% increase in salaries for federal employees.

However, observers believe that these adjustments will undoubtedly face strong opposition in the House of Representatives, which was recently regained by the Republican Party in the election. In addition, some of Biden’s proposals are considered too extreme and even unpopular with the National Guard.