Bipartisan Push to Close Crypto Wash Sale Tax Loophole
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- Rep. Jodey Arrington (R-Texas) introduced the Applying Existing Tax Anti-Abuse Rules to Digital Assets Act in June, which would apply wash sale rules — barring a loss deduction if the same asset is repurchased within 30 days — to cryptocurrency transactions.
- Wash sale rules, on the books since 1921, don't currently capture crypto because the federal government treats digital assets as property rather than securities, leaving a hole that investors 'are going to drive a truck through,' said BYU accounting professor Troy Lewis.
- The Treasury Department in 2024 estimated that extending wash sale rules to digital assets would raise nearly $24 billion over a decade — a rare budget-raiser in today's political environment, Lewis noted.
- Rep. Ron Estes (R-Kansas) told a June House Ways and Means Committee hearing that extending the rules to digital assets ensures they are 'not treated better or worse than similar financial assets,' signaling buy-in from the committee's Republican leadership.
- The House Ways and Means Committee held a June hearing on six crypto tax bills — the first time a tax-writing committee's leadership put forward its own cryptocurrency proposals, according to Grant Thornton's Colin Wilhelm.
- Bitcoin has lost about half its value since October 2025, leaving many investors sitting on losses and more likely to benefit from the wash sale exemption — which Lewis cited as a key reason the issue is gaining momentum now.
- Crypto ETFs are classified as securities and their holders already must comply with wash sale rules, Lewis said; only directly-held crypto — classified as property — currently qualifies for the loophole, meaning ETF investors are unaffected by the proposed change.
Why it matters: If enacted, the bill would eliminate a tax advantage uniquely available to direct crypto holders and potentially raise $24 billion over a decade per Treasury estimates. Investors sitting on losses from bitcoin's roughly 50% drop since October 2025 stand to lose the most; crypto ETF holders already face the rules and would see no change.
