Key Takeaways
- The Biden Administration has proposed a 44.6% capital gains tax, the highest since 1922, affecting high-income individuals. This proposal aims to address equity issues in the taxation system.
- The proposal covers extensive taxation of capital gains, including digital assets, although it is not explicitly targeted at them. It suggests applying ordinary income tax rates to long-term gains for taxpayers with incomes exceeding $1 million.
- The proposed changes primarily affect long-term tax rates for high-income earners, with most people unaffected, including those in the crypto space. Lower-income earners are unlikely to see significant changes in their tax rates.
- The proposal is in the early stages and has not been passed into legislation or IRS regulations. Even if approved, it would take years to implement.
You may have heard about the 44.6% capital gains tax proposed by our current sitting President. This would be the highest tax creation since 1922.
On the positive side, however, the proposal has not yet been passed, which most Americans disagree with.
This article will explain exactly what this tax proposal could mean for all of us, including crypto as well.
General Explanations Of The Administration’s Fiscal Year 2025 Revenue Proposals
The Administration’s Fiscal Year 2025 Revenue Proposals were released by the Department of the Treasury on March 11th, 2024. This proposal covers the extensive taxation of capital gains, which will also apply to digital assets.
Now, this proposal is not specifically about digital assets, it is more of a global approach toward taxation. However, this is one of the vast areas of change recommended by the Biden Administration.
The proposal wants to apply long-term gains using ordinary rates instead of long-term ones. Now, realize that there are two current capital gains rates out there:
- Short-term: Assets bought and sold for less than one year are taxed at your ordinary income tax rate.
- Long-term: Assets bought and sold for more than one year benefit from lower and more favorable rates.
According to the document, this will only affect taxpayers whose taxable income exceeds $1 million, and most of us will not fall into that category. Additionally, there are also adjustments for inflation on the government’s side.
Also, tax rates are bracketed, so lower-income earners are still taxed at a much lower long-term capital gains rate.
Why Is The Biden Administration Proposing This?
The Biden Administration has noted that the current capital gains tax structure tends to benefit very high-income individuals and they are moving to create more equity in the taxation system.
Who Does This Affect?
It does not affect anybody right now because it is all just a proposal at this point. This has nothing to do with legislation or IRS regulations. Even if it were approved, it would still take years before this proposal would come to fruition.
What Does This Document Mean In The Larger Picture?
This is currently at the political level, and no current legislation or rulings exist. It won’t go anywhere anytime soon as it is just a suggestion. And with the pending elections coming up, we have no idea which direction this will go.
Final Thoughts
Overall, this only affects long-term tax rates for individuals earning over $1 million in one year and is a nothing burger for most people in the crypto space. For more information about this tax proposal, make sure to hire somebody who knows all of the different laws regarding taxes.
Via: 2Usethebitcoin.com
