Offset the crucial bitcoin tax while you can this lucrative loophole could end in 2022

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This may be your last chance to take advantage of one of the most successful tax loopholes available in cryptocurrency. CNBC reported that a so-called crypto wash-sell rule is being considered for 2022, which in turn could cost holders of bitcoin and other digital coins nearly $ 17 billion, according to an estimate by the Joint Committee on the taxation.

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The blank sale rule was designed to discourage investors from selling at a loss to claim a tax advantage. According to the United States Securities and Exchange Commission, a no-effect sale occurs when you sell a security at a loss and then buy that same security, or substantially identical securities, within 30 days of or after the sale.

The House Ways and Means Committee released a summary report stating that it plans to treat cryptos more like stocks. CNBC noted that crypto is currently classified as property, so losses on crypto holdings are treated very differently.

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Shehan Chandrasekera, head of tax strategy at crypto-tax software company CoinTracker.io, said one thing savvy investors do is sell at a loss and buy back bitcoin at a lower price in an attempt to appear as poor as possible.

He added that investors can take advantage of an unlimited amount of losses and carry them forward for an unlimited number of tax years. This is also known as the harvest of tax losses. You can sell investments at a loss to offset gains made by selling other securities at a profit. This reduces your tax payable for that year.

Chandrasekera also told CNBC that bookkeeping is essential. Without detailed records of your transaction and cost base, you can’t justify your calculations to the IRS, he said.

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If this proposal is passed, investors have until December 31 to take advantage of the loophole to reduce their 2021 tax bill. The new rule would come into effect on January 1.

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Last updated: September 30, 2021

This article originally appeared on GOBankingRates.com: Offset Critical Bitcoin Tax While You Can This lucrative loophole could end in 2022

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