President of the United States Donald Trump signed a new bill that could implement taxation on cryptocurrency. This means transactions on the exchange of cryptocurrency will be under the tax. This has become a significant change in the country’s tax legislation over the past 30 years.
Legislation and Regulation of Cryptocurrency
In accordance with Article 1031 of the US Tax Code, cryptocurrency transactions were considered an “exchange of similar assets” before, which allowed investors to use a “loophole” and avoid paying taxes. However, from January 1, 2018, all transactions involving digital money, including the exchange of one cryptocurrency for another, will be subject to compulsory tax.
This was the result of amendments to an article that classifies certain assets as “similar type”. Traders used the so-called “exchange 1031” rules, which allowed for the exchange of property without paying taxes. From March 2014, the US Internal Revenue Service regarded Bitcoin and Altcoins as a property. Nevertheless, it was not clear whether the exchange of one cryptocurrency for another falls under the article about “similar assets”. Until this time, digital money remained in the grey zone.
Since January 1, 2018, Article 1031 will cover only real estate. Moreover, the definition of “property” has narrowed to “material ownership”, under which neither Bitcoin nor other cryptocurrencies already fall. Thus, next year one of the most significant “loopholes” in the US tax law will be closed. Moreover, all cryptocurrency transactions on the territory of the country will be under tax right at the moment of the commission.