Tax loopholes are helping Bitcoin traders evade massive tax burdens

July 26 news, due to a tax loophole, Bitcoin traders in the United States are evading a large amount of tax burden.
Cryptocurrency prices are now down 37% from their all-time high in May. Despite the huge losses, traders have also benefited from loopholes in the U.S. tax system that allow them to evade large amounts of tax.
Tyrone Ross, CEO of Onramp Invest, an investment advisory firm, said that according to the IRS's classification of digital cryptocurrencies such as Bitcoin, trading losses on digital cryptocurrency assets are treated differently from trading losses on securities such as stocks and mutual funds. Wash sale rules do not apply to digital cryptocurrency transactions, which means you can sell Bitcoin and buy it back immediately without affecting the relevant tax benefits. But for stock transactions, you must wait 30 days before buying it back, otherwise the tax benefits will be affected.
A wash sale is when a trader sells securities (including stocks, bonds, options) at a loss and then buys back the same or substantially the same securities shortly thereafter. The United States stipulates that if the same securities are repurchased within 30 days of the sale, the loss will not be included in the tax credit for the current or next year.
This subtle difference in U.S. tax law has a huge impact on people who hold digital cryptocurrencies in the United States, leaving a channel for tax evasion.
Shehan Chandrasekera, head of tax strategy at CoinTracker, a cryptocurrency portfolio tracking and tax calculation platform, said traders' losses may not look good, but they will be used to offset taxes later.
Chandrasekera also said that accumulating these losses has become a way for traders to offset their tax burden in the future. "The losses you accumulate in trading can be used in subsequent tax years."
When a person liquidates their cryptocurrency holdings, they can use accumulated losses from trading to offset capital gains tax.
Suppose a taxpayer buys a Bitcoin for $10,000 and then sells it for $50,000. This person must pay capital gains tax on the $40,000 profit. However, if this taxpayer has previously suffered a $40,000 loss from cryptocurrency trading, he will be exempt from capital gains tax on this profit.
According to Chandrasekera, CoinTracker users are now using this strategy to avoid taxes. But he warned that it is necessary to keep detailed transaction records. "Without detailed transaction records, you cannot prove your tax exemption to the IRS."