In a formal presentation of the proposed budget for the fiscal year 2024, U.S. President Joe Biden advocated the elimination of tax subsidies for cryptocurrency investors, the real estate business, and the oil and gas sector. In a high-stakes battle over federal finances, Biden made his opening proposal on Thursday by outlining a federal budget that would reduce deficits by nearly $5.5 trillion over the next ten years.
Biden’s Budget Targets Crypto
According to the White House, the new budget would deliver an estimated $24 billion in savings by eliminating a tax subsidy for investors in cryptocurrencies. This subsidy or better known as the “Tax-loss harvesting strategy” gave investors the ability to sell any cryptocurrency at a loss and take a tax loss to reduce their tax burden, however, the investors could then buy back the same crypto the very next day.
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This lowers the investor’s taxable income and thus, their tax burden. While traditionally utilized in the stock market, tax-loss harvesting is just as applicable to cryptocurrency investments. Crypto investors could capitalize on tax-loss harvesting by carefully managing their portfolios and selling unprofitable holdings tactfully, thereby reducing their taxable income and keeping more of their earnings. The Internal Revenue Service (IRS) was aware of this loophole, and therefore issued multiple warnings to investors to discourage them from engaging in the practice of frequently selling digital assets at a loss and then purchasing them back again.
More Trouble For Bitcoin Price?
In a manner analogous to the removal of the tax subsidy for cryptocurrencies, Biden’s budget eliminated a tax loophole for real estate investors as well. Earlier, real estate investors were able to postpone paying taxes on profits from deals for an indefinite period so long as they continued to invest in other residential or commercial properties. According to the White House, this action would result in a savings of roughly $19 billion.
In addition — what comes as a surprise to many — President Biden has imposed a 30% tax on all electricity used to mine Bitcoin and other cryptocurrencies. The price of Bitcoin took a significant hit as a result of this news, and it is presently trading at roughly $20,900. This represents a decrease of 5.05% over the past 24 hours, in comparison to a drop of 11% recorded over the last seven days. The fact that market participants are selling off their holdings in preparation for the implementation of the new budget can be felt across the broader crypto market. As, not only Bitcoin, but the majority of leading altcoins such as Ethereum, XRP and Polygon are recording significant losses at the time of writing.
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