Before Christmas holidays, Donald Trump has signed new US tax law. It appears the legislation will also impact cryptocurrency traders. How the US New Tax Law Affects Cryptocurrency Investors?
27 December, AtoZForex – In the course of the last week, the President of the US, Donald Trump, has inked the US tax reform bill. The decision is about to influence the lives of almost every US citizen in some way. In fact, cryptocurrency investors will be affected, too.
How the US New Tax Law Affects Cryptocurrency Investors?
The US cryptocurrency traders will face the new law that was signed by Donald Trump. Reportedly, the new legislation will imply that the officials will tighten the tax loophole investors have been using to save money.
Starting from March 2014, US Internal Revenue Service (IRS) has considered cryptocurrencies properties in terms of taxation. Therefore, investors had to pay capital gains tax on the digital currencies’ profit. With this law, investors were allowed to pay tax only while exchanging cryptocurrencies with fiat currencies.
Also, for those, who held cryptocurrencies for less than a year, the regular income tax has been ranging from 10 to 37 percent, based on the income level. For the holdings above a year, only the long-term capital gains tax had to be paid. This was limited to 24 percent.
US Cryptocurrency exchanges will not be able to use ‘1031 exchanges’
In order to avoid short-term capital gains tax, US cryptocurrency traders were using ‘1031 exchanges’ to swap between coins. These exchanges are specifically used by property traders to save tax on the exchange of properties between two parties. In fact, there was nothing noted in the law in regards to the cryptocurrencies. Despite this fact, investors were using this loophole to save some money.
However, now this is about to change. The new tax laws will exclude cryptocurrencies from using the 1031 exchange for any type of coin swapping. When the new US tax law will come into force, cryptocurrency traders will be taxed for every single trade they make.
Back in 2015, a total of 802 customers of Coinbase, the biggest US exchange, have declared Bitcoin investments. This has resulted in the lawsuit against the trading platform. As a matter of fact, the IRS also noted that it has been concerned with the recent Bitcoin price rally and the overall rising interest to the crypto market. That is why the US has moved to the point of regulating the cryptocurrency market revenues more accurately.
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