A tax cut proposed by U.S. President Donald Trump could be a major victory, or a relatively minor one, for the crypto coin industry if approved.
At a White House press conference earlier this week, President Trump said his administration was „very seriously“ considering a capital gains tax cut.
„We are also considering a capital gains tax cut, which would create many more jobs.“
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There is a debate about the extent of President Trump’s ability to reduce taxes. The long-term capital gains rate of 20% is primarily governed by Congress, so to deliver a large cut he would need to have legislators on his side through negotiation.
Alternatively, an executive order could be used to cut tax bills in a move known as indexing capital gains to inflation. That is, the original purchase price of an asset is adjusted when it is sold, so that no tax is paid on inflation-linked appreciation, according to Bloomberg. This would be of much less benefit to traders, as crypto-profits can make the CPI seem insignificant.
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The current status of U.S. crypt-currency taxes
Taxes in the United States are a minefield. Americans are required to report profits and losses on every crypto currency transaction, or when they earn crypto currency through staking, whether they have made a profit or not.
The Internal Revenue Service, or IRS, identifies crypto currencies as property, not coins, so they must be reported. Failure to report the proceeds from the sale of digital assets could result in penalties and interest on unpaid taxes.
The IRS also states that wages paid to employees using crypto-currency are subject to federal income tax withholding and payroll taxes.
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As Cointelegraph reported earlier this month, the IRS is getting much smarter about tracking cryptomoney taxes. As the rewards of staking out gain momentum, U.S. tax authorities are keeping up with the game.
The impending introduction of staking in Ethereum 2 will be a capital gains nightmare for stakers, as recipients need to record the amount and current price of the rewards each time they are distributed.
If Donald Trump succeeds in pushing through his proposed capital gains tax reduction, it will at least offer the Cryptosoft opportunity to keep a little more of the profits after all the registration and paperwork is completed.