A bipartisan group of U.S. lawmakers is renewing efforts to eliminate a tax break for cryptocurrency investors by extending wash sale rules to digital assets. The proposal targets a gap in the tax code that allows crypto investors to sell assets at a loss and immediately repurchase them while claiming the loss for tax purposes, a strategy prohibited for stock investors under existing wash sale rules. The legislation, known as the Applying Existing Tax Anti-Abuse Rules to Digital Assets Act, has been introduced in the U.S. House of Representatives and referred to the House Ways and Means Committee. Supporters argue the measure would close an unintended loophole by treating digital assets the same as traditional investments for tax purposes. The push comes as Congress debates broader cryptocurrency policy, with this tax proposal drawing rare bipartisan support focused on tax fairness rather than industry regulation.
Current Tax Treatment Distinguishes Crypto from Securities
Cryptocurrencies are generally treated as property rather than securities under the U.S. tax code, leaving digital assets outside wash sale restrictions that apply to stocks and other traditional investments, according to CNBC. That distinction allows cryptocurrency investors to sell assets such as bitcoin or ether at a loss, immediately buy them back and still claim the realized loss for tax purposes, provided they meet other IRS requirements. Stock investors, by contrast, are generally barred from using the same strategy because of the wash sale rule, which prevents investors from selling stocks or other securities at a loss and immediately repurchasing them to claim a tax deduction.
Lawmakers Introduce Wash Sale Extension Bill for Digital Assets
The legislation would extend existing wash sale and constructive sale rules to cryptocurrencies, according to the bill published by the U.S. Government Publishing Office. The bill has attracted bipartisan backing, a relatively uncommon point of agreement as Congress continues debating broader cryptocurrency policy. Supporters of the measure argue that the proposal would close an unintended gap in the tax code by putting digital assets on equal footing with traditional investments. Tax experts told CNBC that applying wash sale rules to crypto has drawn support across party lines because it focuses on tax fairness rather than industry regulation.
Proposed Legislation Would Require Waiting Period for Crypto Repurchases
The bill would remove the flexibility crypto investors currently have for tax-loss harvesting by requiring them to wait before repurchasing the same digital asset if they want to claim the tax loss, mirroring rules that already apply to stocks and many other securities. Tax-loss harvesting has become a common strategy during periods of market volatility, allowing investors to reduce taxable gains while maintaining exposure to the same asset through an immediate repurchase. The proposal arrives as bitcoin has fallen sharply from its October 2025 peak, creating opportunities for investors to realize losses while remaining invested in the market, CNBC reported. Market volatility has made tax-loss harvesting an increasingly common strategy among digital asset investors.
Bill Referred to House Ways and Means Committee
The legislation has been referred to the House Ways and Means Committee, according to the U.S. Government Publishing Office. The bill has not yet advanced to a full House vote. Until any changes become law, current IRS rules governing cryptocurrency transactions remain in effect. The renewed push comes as lawmakers also weigh legislation covering stablecoins, digital asset market structure and broader oversight of the cryptocurrency industry, with those proposals generating partisan debate.
FAQ
What does the proposed legislation do to cryptocurrency tax treatment?
The Applying Existing Tax Anti-Abuse Rules to Digital Assets Act would extend existing wash sale and constructive sale rules to cryptocurrencies, requiring crypto investors to wait before repurchasing the same digital asset if they want to claim a tax loss, according to the bill published by the U.S. Government Publishing Office.
Why are cryptocurrencies currently exempt from wash sale rules?
Cryptocurrencies are generally treated as property rather than securities under the U.S. tax code, leaving digital assets outside wash sale restrictions that apply to stocks and other traditional investments, according to CNBC. That distinction allows cryptocurrency investors to sell assets at a loss and immediately buy them back while claiming the realized loss for tax purposes.
What is the current status of the bill in Congress?
The legislation has been referred to the House Ways and Means Committee and has not yet advanced to a full House vote, according to the U.S. Government Publishing Office. The bill has attracted bipartisan backing among lawmakers.
