Are You Prepared For The New Rules For Crypto Taxes Under Biden Administration?

The White House is expected to issue an executive order–directing government agencies to address the cryptocurrency industry as a matter of national security–under the leadership of US President Joe Biden.

Cryptocurrencies have made their impact on the financial industry over the previous decade, but the prospect of the order upsetting the crypto-market sent prices falling as fears grew.

So, how will this executive order decide the fate of crypto taxes in the USA? Should taxpayers expect higher crypto taxes this tax season? Let’s take a look.

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Existing Rules For Crypto Taxes In The USA

In the year 2014, the Internal Revenue Services or the IRS released an official document, Notice 2014-21 which stated that the profits that one makes from specified cryptocurrency transactions will be taxed as either capital gains taxes or income taxes.

To simplify the above, it means that the IRS taxes cryptocurrency as property, or other assets, and not as ‘currency’. The rate of crypto taxes varies depending on the tax slab one falls under and also the holding period of one’s digital assets.

National Security Memorandum

Towards the end of January 2022, the Biden administration announced that it will evaluate cryptocurrency as part of a “national security memorandum” with the goal of developing a legal framework for cryptocurrency.

What Will This Executive Order Include?

The executive order is said to entrust government agencies with examining the crypto ecosystem. This includes developing a legislative framework for all of its sectors, including Bitcoin, stablecoins, and non-fungible tokens (NFTs).

Stringent crypto legislation isn’t a new concern, considering its decentralized nature. However, owing to the increased importance of central bank digital currencies (CBDCs), many argue that new regulations will offer the perfect context to decentralize the opponents.

New Crypto Taxes Regulation

If the United States or any other government chose to penalize Bitcoin in favor of its own digital currency, one option would be to raise crypto taxes on investments.

Another issue that might pull the rug out from under Bitcoin, and possibly Ethereum in the short term, is the Biden team’s fear that cryptocurrency mining consumes too much power and is thus harmful to Earth. Unlike the printing of money. That is not as harmful to the environment.

The Bottom Line: What Can Be Expected?

Various federal regulatory bodies in the USA, such as the Commodity Futures Trading Commission (CFTC), the Securities and Exchange Commission (SEC), and the Office of the Comptroller of the Currency (OCC) had been involved with crypto taxes regulation.

Over time, these organizations have engaged in laying down rules, issued informal statements as well as guidance letters on how crypto taxes and federal regulations must be balanced. However, these attempts haven’t yet been consolidated.

As of now, we can only assume what the executive order will hold on the basis of the news that gets reported. Furthermore, the United States is not alone in this regard; nations such as India and Russia are also considering measures to regulate the cryptocurrency and enact crypto taxes.

FAQs

• Is the US going to tax crypto?

In the year 2014, the Internal Revenue Services or the IRS released an official document, Notice 2014-21 which stated that the profits that one makes from specified cryptocurrency transactions will be taxed as either capital gains taxes or income taxes.

The crypto taxes in the USA range from 0% to 20% for long-term capital gains and from 10% to 37% for short-term capital gains.

• Is crypto changing taxable?

Yes, swapping crypto is a taxable event in the USA. While purchasing currency is not a taxable event, changing it to cash or swapping it to another coin, paying for goods and services, getting paid for work, and other activities might result in taxes.

• How much is the government tax on crypto?

The IRS states that the profits that one makes from specified cryptocurrency transactions will be taxed as either capital gains taxes or income taxes.

The rate of crypto taxes varies depending on the tax slab one falls under and also the holding period of one’s digital assets. The crypto taxes in the USA range from 0% to 20% for long-term capital gains and from 10% to 37% for short-term capital gains.

Read more: What Does Arizona’s Bitcoin Bill Mean for the Cryptocurrency?