Last Updated on March 10, 2023 by Bitfinsider
President Joe Biden’s budget proposal, which aims to “reduce mining activity,” could ultimately subject cryptocurrency miners in the United States to a 30% tax on electricity expenses.
Any company using resources, whether they are owned or rented, would be “subject to an excise tax equal to 30% of the costs of electricity used in digital asset mining,” according to a Department of the Treasury supplementary budget explainer paper published March 9.
It was suggested that the tax would go into effect after December 31 and would be brought in over three years at a rate of 10% per year, rising to the top tax rate of 30% by the third year.
The “amount and type of electricity used as well as the value of that electricity” would be subject to reporting rules for cryptocurrency miners.
The tax would still apply to cryptocurrency miners who obtain their electricity off-grid, and they would be forced to calculate the cost of electricity produced by any “electricity generating plant.”
Treasury cited “negative environmental effects” have increased prices for those using a grid shared with the activities, and “uncertainty and risks to local utilities and communities” as reasons for the tax.
The White House confirmed in a statement on March 9 that it is looking to end a tax strategy for cryptocurrency transactions that it thinks would generate $24 billion.
The tax-loss harvesting practice of selling digital assets at a loss for tax reasons and then buying them back right away is permitted under current regulations for cryptocurrency investors.
The new regulations would align cryptocurrency trading tax laws with those governing stocks, where such a tactic is prohibited by wash sale regulations.
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