A key tax loophole can help holders of cryptocurrencies such as Bitcoin BTC/USD, Ethereum ETH/USD and Dogecoin DOGE/USD to save on their federal tax bills in the U.S., according to a report by CNBC.
What Happened: Onramp Invest CEO Tyrone Ross said that while wash sale rules apply to stocks and mutual funds, they do not apply to cryptocurrencies because they are treated as “property” by the IRS, as per the report.
See Also: How To Buy Bitcoin (BTC)
Investors can sell their holdings in cryptocurrencies and buy them right back, unlike the waiting period of 30 days required in the case of stock transactions. This loophole allows investors to bypass the wash sales rules and harvest cryptocurrency tax losses more aggressively than stock losses.
Shehan Chandrasekera, a CPA and head of tax strategy at cryptocurrency tax software company CoinTracker.io., was quoted by the report as saying that cryptocurrency investors can harvest an unlimited amount of losses and carry them forward into an unlimited number of tax years.
See Also: Bitcoin Teases $40,000 — Are We Seeing A Short Squeeze?
Why It Matters: The tax loophole provides an opportunity for cryptocurrency investors to harvest some of their losses and reduce their tax bills as the cryptocurrency markets remain below their all-time highs reached earlier this year.
Bitcoin is down 40.6% from its all-time high of $64,863.10 reached in April. Ethereum and other altcoins have also witnessed similar downturns this year.
Price Action: Bitcoin is up 12.8% during the last 24 hours, trading at $38,879.99 at press time, while Ethereum traded almost 9.3% higher at $2,365.45 over 24 hours. Dogecoin is up 17.4% at $0.2318.
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