Crypto Investors Could Lose A Major Tax Break As Congress Revives An Old Fight

A bipartisan group of U.S. lawmakers is renewing efforts to eliminate a tax break that has long benefited cryptocurrency investors, reopening a debate over whether digital assets should be subject to the same tax rules as stocks and other traditional investments.

The proposal targets the so-called "wash sale" rule, which prevents investors from selling stocks or other securities at a loss and immediately repurchasing them to claim a tax deduction. Cryptocurrencies are generally treated as property rather than securities under the U.S. tax code, leaving digital assets outside those restrictions, CNBC reported.

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.

The legislation, known as the Applying Existing Tax Anti-Abuse Rules to Digital Assets Act, would extend existing wash sale and constructive sale rules to cryptocurrencies, according to the bill introduced in the U.S. House of Representatives and published by the U.S. Government Publishing Office.

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. The legislation has attracted bipartisan backing, a relatively uncommon point of agreement as Congress continues debating broader cryptocurrency policy.

The renewed push comes as lawmakers also weigh legislation covering stablecoins, digital asset market structure and broader oversight of the cryptocurrency industry. Those proposals have generated partisan debate, but 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.

If approved, the legislation could significantly change year-end tax planning for cryptocurrency investors. 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 bill would remove that flexibility by requiring crypto investors 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.

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.

The legislation has been referred to the House Ways and Means Committee, according to the U.S. Government Publishing Office, and has not yet advanced to a full House vote. Until any changes become law, current IRS rules governing cryptocurrency transactions remain in effect.