Last week, shortly after declaring his support for the cryptocurrency sector, Donald Trump highlighted another significant point. Trump accused his opponent in the United States presidential race, incumbent President Joe Biden, of having a negative attitude towards the sector and stated that he would implement major tax cuts if re-elected.
Trump’s Tax Statement
During his campaign event on May 12, Trump shared Biden’s new tax project with participants. He pointed out that Biden’s project would increase capital gains taxes, which could also affect crypto investors, and announced that he would implement “the biggest tax cut” for all social classes.
Instead of a Biden tax hike, I will give you, the middle class, lower class, working class, a big tax cut. You will have the biggest tax cut. And we were ready to do this, we were all ready to do it.
Tax Adjustments and Crypto
Looking back, Trump’s previous tax bill signed in December 2018 is noteworthy. This bill did not directly include digital assets like Bitcoin (BTC), Ethereum (ETH), and tokens introduced through Initial Coin Offerings (ICOs), thus not providing clarity for crypto investors, traders, issuers, and miners.
On the other hand, some lawyers continued to argue that capital gains taxes could already apply to crypto assets, suggesting an indirect effect. Nevertheless, some crypto investors, for example, consider the exchange of Ethereum for Bitcoin as a similar exchange exempt under section 1031 of the tax law.
Jeremy Naylor, a partner at Proskauer Rose LLP, also made a statement on the matter:
Taxpayers who classify the exchange of cryptocurrencies as a like-kind exchange are taking a risk that the Internal Revenue Service (IRS) will not agree with them under the new law, which clearly states “you can no longer do this.”
Moreover, it is important to remember that the exemption previously applied to “like-kind properties” in section 1031 of the mentioned tax law is now only valid for “like-kind real properties,” excluding crypto assets. Considering this, crypto capital gains are taxable, and Trump’s promised cuts could mean lower capital gains taxes for crypto traders and investors.
