Build Back Better Act would close tax loophole for crypto investors – CNBC

Build Back Better Act would close tax loophole for crypto investors – CNBC

Photo by Mike Kline (notkalvin) | Moment | Getty Images

Proposed legislation unveiled Thursday as part of Democrats’ $1.75 trillion social and climate spending plan would close a tax loophole for cryptocurrency investors.

The Build Back Better Act would subject crypto transactions to “wash sale” rules, an anti-abuse measure that currently applies to stocks, bonds and other securities, according to an outline published by the House Rules Committee.

As a result, bitcoin, ethereum, dogecoin and other crypto would be subject to the rules. They prevent investors from claiming tax benefits from an investment loss then quickly buying back that same asset, effectively retaining ownership.

The new proposal would apply after Dec. 31.

The Rules Committee proposed its near-final legislative draft after the White House unveiled a policy framework Thursday morning, the result of months of negotiations among moderate and progressive Democrats.

The legislation may still evolve and its success isn’t guaranteed. Democrats need nearly full party support in both chambers for the measure to pass, given unified Republican opposition. Key holdouts haven’t publicly committed to voting for it.

A House Ways and Means Committee tax proposal last month also sought to subject digital currencies to wash sales.

The IRS treats crypto as property, not as a security, which is how the asset class escapes wash sale rules under present law.

More from Personal Finance:
Here’s how Biden’s Build Back Better framework would tax the rich
The enhanced