- Biden proposes increasing capital gains tax to 39.6% from the present 20%
- Crypto investors could see 50% of their earnings eroded
- The measure could see panic selloff of BTC and other crypto coins
The US President Joe Biden is expected to hike capital gains tax for citizens with an income above $1 million. It means a steep hike to 39.6% from the present 20%. The proposed capital gains tax hike has already given jitters to a lot of American cryptocurrency speculators. Moneyweek.com featured an article by Saloni Sardana, which dissects Joe Biden’s planned tax hike on the cryptocurrency market.
Bitcoin sellers could get hit with big tax bills
Bitcoin and other cryptocurrencies have been going through a seesaw of action in the last few months. In February, Tesla announced that it would accept Bitcoin(BTC) as currency for selling its electric-powered car. The value of BTC surged. Elon Musk’s tweets helped the values of meme-based Dogecoin surge. Yesterday the value of Bitcoin tanked after Musk tweeted that Tesla will not accept BTC as payments for its wares. However, more trouble is in store if President Biden can push through his plans to increase capital gains tax.
Bitcoin and many other cryptocurrencies have surged by geometric proportions in the last few months. Any investor who holds on to BTC or other crypto coins will risk paying higher capital gains tax. A user who earns $1 million will have to shell out 39.6 % as taxes plus an additional 3.8% surcharge on higher-income investors. In some states with other additional taxes, this figure can reach above 50% of the profits on Cryptocurrency.
The tax measures may trigger a selloff in crypto markets
An unwanted outcome of the hike in capital gains tax will be investors selling off their crypto assets to pre-empt paying higher gains tax later. When the proposal was first floated last month, there was a sharp fall in most cryptocurrencies. If the measures are pushed through, it can trigger a sharp selloff. Moneyweek spoke to Chris Etherington, a private client tax partner at RSM UK, who said that such a move would generate significant turbulence in the crypto markets as the US.
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