The announcement that came early this week about the appointment of Larry Kudlow as the new economic advisor in the White House, couldn’t have come at a better time for crypto enthusiasts. Frankly, the market has been on a bearish trend and President Trump’s announcement of Gary Cohn’s replacement was more than just regular news from the nation’s capital for most if not all crypto investors.
According to Kudlow, a former CNBC contributor and also a former Bear Streams economist, the second phase of tax reforms and overhaul packages by the White House have just embarked on their second phase. In a lengthy interview with the CNBC, he hinted at plans by the White House to lower tax rates for capital gains.
What Will This Move Mean for Crypto Investors?
It only is a matter of weeks since reports came out of the IRS (Internal Revenue Service) announcement of its stance on Bitcoin and cryptocurrencies, considering them as property, not digital currencies. With that in mind, a lower capital gains rate would translate to lower tax policies on crypto trading and investing, especially for US residents.
Currently, US residents making transactions with cryptocurrencies have been pushed into a corner in which they have to pay tax twice. Since all transactions have to be reported to the IRS whether losses or gains have been made, investors and holders Bitcoins, as well as crypto traders, are currently being charged for making gains on crypto income as well as being required to pay property tax for holding crypto in the first place, as its considered a commodity.
This has led to investors and holders of cryptocurrencies paying exorbitantly high taxes, which were just implemented a few weeks ago – beginning with Coinbase users. Basically, long-term crypto investors have had favorable tax treatment while short-term investors who have been holding cryptocoins for less than a year, have been taxed at the same rate as ordinary income tax.
Still no Definitive Answer on Tax Obligation Rules
Even though there seems to be some light at the end of the tunnel for most crypto investors with the recent developments from the White House, there is still a lot to be determined, considering that the IRS is yet to issue definitive guidance on which cryptocurrency transactions are taxable and which ones are not. Normally, crypto to crypto trading has been considered non-taxable, given that both items are of ‘like-kind’.
However, such existing ambiguities might soon prove fatal to the crypto community of investors, especially when it comes to exchanging a coin such as Bitcoin with small-cap altcoin, only to realize that the exchange is taxable.
However, with hopes of a possible lowering of the capital gains rate, long-term cryptocurrency investors can rest easy knowing that they have a chance of taking a good chunk of their coins out of the taxman’s pocket.
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What do you think will eventually happen with the hint from Kudlow about lowering the capital gains tax rates? Share your thoughts and opinions with us in the comments section.