The wash-sale rule catches up

Tax bills are read from the provision the sponsors lead with, which is usually the one that costs the least. This one leads with a $10 exemption and is carried by something else entirely.

The Digital Asset Tax Certainty Act, H.R. 10357, runs to 114 pages and was released ahead of a House Ways and Means markup set for Wednesday morning. CoinDesk reports it was introduced by Representatives Steven Horsford and Max Miller, and that it covers de minimis transactions, gain and loss accounting, transfers, wash sale rules, mining, staking and broker requirements.

Start with the small part, because it is genuinely useful. Network and transaction fees below $10 would stop generating taxable events, which removes an accounting burden that has been absurd since the beginning: a wallet that pays forty cents in gas has technically disposed of property and owes a calculation on it.

The relief is also bounded. It does not extend to anyone who made more than 5,000 transfers in a year, which draws the line between a person using a wallet and a business operating one. That is a reasonable place to draw it, and it is the first sign that the bill is not simply an industry wish list.

The provision that matters is the wash-sale rule. Section 1091 has, since 1921, denied a loss deduction when a taxpayer sells at a loss and buys the same position back inside thirty days — and it applies to "stock or securities", which digital assets have never been. The practical result is that crypto holders have been able to sell at the bottom, rebuy immediately, keep the position and book the loss.

Extending the rule ends that, and it ends a real annual practice rather than a theoretical one. Tax-loss harvesting without a holding gap has been a standard December exercise for anyone with a large position and a bad year, and it is the single largest revenue item in this bill by a distance.

Constructive-sale rules go the same way, which closes the matching side of the door: holding an offsetting position rather than selling has been the other route to a realised loss without a realised disposal.

Qualified US dollar stablecoins are excluded, and the exclusion is correct rather than generous. A wash-sale rule on an instrument designed not to move in price would be a rule about nothing, and treating a payment token as a trading position is how tax codes acquire provisions nobody can administer.

What the bill does not do is resolve where any of this sits. It directs Treasury and the IRS to write rules as needed, which is the sentence that decides how the statute actually behaves, and those rules do not exist yet.

Timing is the honest caveat. The House has limited floor time before the recess that follows November's election, and a 114-page tax bill introduced in September of an election year is more often a marker for the next Congress than a law for this one. The markup on Wednesday will show which of the two it is.