Illinois is proposing a crypto tax so aggressive it could effectively ban decentralized finance (DeFi) in the state and the biggest players in Web3 are officially fighting back. Thankfully, the biggest players in Web3 just stepped in to stop it. Uniswap Labs, a16z, and the DeFi Education Fund just filed a joint demand to overhaul the state’s proposed 0.2% digital asset tax. The state's draft rules attempt to classify decentralized exchanges (DEXs) and self-custodial wallets as traditional corporate "brokers." The two most dangerous provisions? 1️⃣ The Private Key Honeypot: Forcing platforms to record customer private keys, creating a massive centralized target for hackers. 2️⃣ Taxing Your Own Money: Attempting to tax users simply for moving their own crypto from an exchange to a self-custodial wallet. Because of this massive pushback, Illinois is reportedly delaying the tax to 2027. You can read a copy of the letter to the Illinois Department of Revenue here: https://t.co/tuumWDpY2J

How can losses on crypto help to lower your tax bill? Tax-loss harvesting is one of the most powerful strategies to lower your tax bill using underwater crypto. When the market drops, like the significant selloff seen in October 2026, many investors find themselves holding cryptocurrency worth less than what they originally paid for it. If you simply hold those assets, those "paper losses" do nothing for your taxes. You do not realize a loss until you dispose of your crypto through selling, exchanging crypto or using it to make a purchase or payment. When you sell the depreciated crypto before December 31, 2026, you turn that paper loss into a "realized capital loss," which actively reduces your tax liability in three steps: 1. Offsetting Capital Gains: Your realized crypto losses first offset any capital gains you made during the year (whether from other crypto, stocks, or real estate) dollar-for-dollar. If you made a $10,000 profit selling Bitcoin earlier this year, but take a $10,000 loss selling Ethereum today, you effectively wipe out the taxes owed on that Bitcoin gain. 2. Offsetting Ordinary Income: If your total capital losses exceed your capital gains for the year, you can use the remaining loss to offset up to $3,000 of your ordinary income (like your W-2 salary or business income). For a single filer in the 22% tax bracket, a $3,000 deduction saves roughly $660 in actual taxes. 3. Carrying Losses Forward: If you still have realized losses left over after maxing out the $3,000 ordinary income deduction, the remainder doesn't expire. It carries forward indefinitely to future tax years, waiting to offset future gains. If you are filing MFS, then your capital losses are limited to $1,500. Currently, the IRS classifies cryptocurrency as property, meaning the dreaded "wash-sale rule" (which applies to stocks and securities) does not apply to directly held digital assets like Bitcoin or Ethereum. This means you can sell your underwater crypto to lock in the tax deduction and immediately buy back the exact same asset to maintain your market position. Congress is actively moving to close this loophole. The House Ways and Means Committee advanced legislation (H.R. 10357) in September 2026 that would apply the 30-day wash-sale rule to digital assets. If enacted, selling and immediately rebuying would disallow the tax deduction, making it critical to execute these trades before any new rules take effect. If you hold Spot Bitcoin ETFs rather than direct cryptocurrency, the wash-sale rule already applies, because ETFs are classified as securities. You must wait more than 30 days before buying the ETF back to claim the loss.

It is a common misconception that losing money in the cryptocurrency market automatically absolves you of a tax liability. However, due to how the IRS classifies and taxes digital assets, there are several scenarios where a taxpayer can owe significant taxes despite suffering overall financial losses. The Ordinary Income Tax Trap - the following transactions are still considered reportable taxable events that must be reported on your tax return: 1. Earning cryptocurrency through activities like mining, staking, airdrops, or receiving it as payment for services is taxed as ordinary income. 2. You owe tax based on the fair market value of the tokens in U.S. dollars at the exact time you receive them. 3. While capital losses can offset an unlimited amount of capital gains, they can only offset a maximum of $3,000 of ordinary income per year. If you have significant income from other sources, the $3,000 capital loss may not drastically reduce your tax liability. For example, you earned $50,000 in staking rewards and later sold those tokens for $5,000, you are still taxed on $47,000 of ordinary income for that year, with the remaining capital losses carrying forward. Unrealized Losses v. Realized Gains Purchasing and simply holding cryptocurrency does not create a taxable event. To claim a capital loss on your tax return, you must "realize" it by selling, trading, or disposing of the asset. If you made profitable trades early in the year, but the crypto you are currently holding has plummeted in value, you cannot use those unrealized losses to offset your earlier gains until they are sold or disposed of.

Lawmakers have introduced a comprehensive package of seven bills designed to force cryptocurrency into the traditional Wall Street tax framework. 🏛️📉 If you are an investor, a trader, or a Web3 founder, this legislation will fundamentally change how you plan your year-end tax strategy. Here is exactly what is hidden inside the House's new digital asset tax package: 🛑 Closing the Wash-Sale Loophole (HR 8899 & HR 9176) These bills propose applying traditional financial tax rules to digital assets by officially extending the 30-day wash-sale rule to cryptocurrencies. This would permanently close the loophole that currently allows investors to execute immediate tax-loss harvesting. (It also extends Section 475 mark-to-market accounting rules for qualifying dealers). 🤝 A New Tax Amnesty Program (HR 9174) Have undisclosed crypto gains from previous years? This bill directs the Treasury to establish a formal voluntary disclosure program. Eligible taxpayers can amend past returns and pay the owed taxes/interest in exchange for protection against criminal prosecution and relief from severe civil penalties. ⛏️ Staking & Mining Clarity (HR 9175) This bill targets network validation by formally characterizing staking and mining rewards as ordinary income. It also establishes definitive sourcing rules to differentiate between U.S. and foreign business operations, settling recent Tax Court disputes. 📄 Safe Harbors & Paperwork Reduction (HR 9172, 9173, & 9178) To round out the package, lawmakers are proposing expanded foreign investment safe harbors (encouraging international participation without triggering U.S. business tax liability), clarified rules for charitable crypto donations, and eased reporting burdens for everyday, small-dollar crypto transactions. ⚠️ The Reality Check: Crypto tax legislation is highly volatile and absolutely subject to change after the upcoming midterm elections. A shift in Congressional power could either accelerate these bills or rewrite them entirely.

Senator Ron Wyden (D-Ore.) has proposed a massive new tax framework targeting the data center boom. As the ranking member of the Senate Finance Committee, Wyden released a discussion draft on October 23, 2026, aimed at forcing the hyperscalers driving the AI and cloud computing expansion to pay for the strain they place on local communities and power grids. According to a recent breakdown by BDO, Wyden's proposal attacks the data center industry on two primary fronts: eliminating existing tax incentives and creating a brand new excise tax. Here are the key takeaways from the legislation: The End of Data Center Tax Breaks Wyden argues that hyperscalers are spending "money hand-over-fist" to build data centers and no longer need special tax code subsidies. The bill would eliminate four major benefits for new data centers (generally defined as 25 MW or larger): 1. No More Bonus Depreciation: Data center assets placed in service after enactment would no longer be eligible for 100% bonus depreciation under IRC § 168(k). 2. R&D Credit Exclusion: The bill clarifies that data center equipment costs do not qualify for the Research and Development tax credit. 3. Opportunity Zone Ban: Qualified Opportunity Zone funds would be prohibited from investing in new data center businesses, as Wyden argues they do not create long-term local employment. 4. REIT Restrictions: Rent collected by data centers would no longer qualify as income for Real Estate Investment Trusts (REITs), unless more than 80% of the REIT's stock is publicly traded. The New "Data Center Public Investment" Excise Tax The legislation proposes a new gross receipts excise tax applied directly to data center services. -This tax is specifically targeted at "hyperscale" data centers, defined by relationships with major players who spend at least $1 billion annually on data center services. -For massive tech companies that build and operate their own data centers for internal use (meaning they have no external "gross receipts" to tax), the bill creates an alternative "cost-plus" imputed tax formula. This formula calculates a tax based on asset depreciation, operating costs, and an assumed 40% profit margin. The revenue generated from this excise tax is intended to directly aid American workers displaced by AI and to help local communities deal with the strain data centers place on housing and the power grid. From https://t.co/gMm8lJEapN, other notable bills taking aim at data centers and AI include: 1. Senate Democrats Mark Warner, D-Va., and Tammy Duckworth, D-Ill., and 28 House Democrats have introduced companion legislation that would deny bonus depreciation to data centers (H.R. 10448 and S. 5054). 2. Sen. Mark Kelly, D-Ariz., has introduced a bill that would impose a digital ad, AI use tax, and AI excess profits tax (S. 5518). 3. Sen. Josh Hawler, R-Mo., has introduced a bill (S. 5418) that would exclude data centers from the definition of qualified opportunity zone businesses. 4. Sen. Bernie Moreno, R-Ohio, has introduced a bill (S. 5689) to make large data centers ineligible for any federal tax credit, incentive, or benefit and impose a 100% federal excise tax on state incentives. While this is currently just a discussion draft from the Democratic staff, it signals a major shift in how Washington views the booming AI infrastructure space. https://t.co/gMm8lJEapN

Happy Halloween! Here are some scary tax posts for today 👻 🎃 Forget ghosts and vampires. If you really want to terrify an Enrolled Agent this Halloween, just tell me you’ve been doing crypto-to-crypto swaps all year without tracking your cost basis. 🎃👻📉 🧟‍♂️ Zombie Tax Preparers: Shady "professionals" claiming fake digital asset losses for clients who don't even own crypto, risking your freedom for a fraudulent refund. (Always review your return before signing!). 🕸️ The 1099-DA Jump Scare: The new broker reporting rules that will report your gross crypto proceeds to the IRS next year, leaving you to untangle the messy cost-basis web on your own. Stay safe out there, don't blind-sign your tax returns, and keep your cold storage seed phrases away from the trick-or-treaters. 🍫🪙

When do you owe taxes even when you don't sell crypto? Investors have watched Bitcoin rocket past $84,000 recently. The good news? If you just held on through that 31% run-up, those paper gains are completely tax-free right now. The IRS treats cryptocurrency as property, meaning simply holding it or moving it between your own wallets—does not create a tax liability. But what if you didn't "cash out" to U.S. dollars? Here is where the IRS traps unsuspecting investors. You do trigger a taxable event if you take any of these actions: 🔄 Swap Coins: Trading Bitcoin for Ethereum (or any crypto-to-crypto swap) is viewed by the IRS as a taxable sale of the original asset. It triggers capital gains, even if no cash ever hits your bank account. 💻 Spend It: Buying a laptop, a watch, or real estate directly with crypto counts as a taxable disposal of that property. ⛏️ Stake or Mine It: Earning staking rewards or mining new coins doesn't trigger capital gains. It triggers ordinary income that must be reported directly on Schedule 1 (line 8v). The 2026 Compliance Warning: As brokers begin issuing Form 1099-DA to report your digital asset activity, many of those forms will only show your gross proceeds. They will not have the historical data to calculate your cost basis. If you have been swapping and staking without meticulous records, you are setting yourself up to pay taxes on money you didn't actually make.

It is a common misconception that losing money in the cryptocurrency market automatically absolves you of a tax liability. However, due to how the IRS classifies and taxes digital assets, there are several scenarios where a taxpayer can owe significant taxes despite suffering overall financial losses. The Ordinary Income Tax Trap - the following transactions are still considered reportable taxable events that must be reported on your tax return: 1. Earning cryptocurrency through activities like mining, staking, airdrops, or receiving it as payment for services is taxed as ordinary income. 2. You owe tax based on the fair market value of the tokens in U.S. dollars at the exact time you receive them. 3. While capital losses can offset an unlimited amount of capital gains, they can only offset a maximum of $3,000 of ordinary income per year. If you have significant income from other sources, the $3,000 capital loss may not drastically reduce your tax liability. For example, you earned $50,000 in staking rewards and later sold those tokens for $5,000, you are still taxed on $47,000 of ordinary income for that year, with the remaining capital losses carrying forward. Unrealized Losses v. Realized Gains Purchasing and simply holding cryptocurrency does not create a taxable event. To claim a capital loss on your tax return, you must "realize" it by selling, trading, or disposing of the asset. If you made profitable trades early in the year, but the crypto you are currently holding has plummeted in value, you cannot use those unrealized losses to offset your earlier gains until they are sold or disposed of.

Did you make an "honest mistake" with your crypto taxes in past years? Congress is currently advancing a massive amnesty lifeline. The new 1099-DA broker reporting rules are finally bringing clarity to digital asset taxes moving forward. But what about the millions of taxpayers who simply misunderstood the rules or lacked the records to correctly report their crypto transactions in 2021, 2022, or 2023? Currently, the IRS’s Voluntary Disclosure Practice is geared toward willful tax evasion and criminal exposure. For ordinary investors who just made honest mistakes, filing amended returns often results in unpredictable and steep civil penalties. This may change. The House Ways and Means Committee just advanced the Digital Asset Tax Certainty Act (H.R. 10357) with overwhelming bipartisan support (38-5). If signed into law, Section 502 of this bill will force the Treasury to establish a Digital Asset Voluntary Disclosure Program. A bill will provide a defined 24-month correction period to file amended returns and pay back taxes. There would be a 0% penalty on the first $25,000 of tax deficiency per year (if filed within the first 12 months). There would also be a highly predictable, reduced 5% penalty on deficiencies above $25,000. Lastly, there would be protection from specified civil penalties. You must certify under penalty of perjury that your past violations were neither fraudulent nor willful. Falsely certifying will immediately escalate your case. This bill is not law yet. It still needs to pass the House and Senate but it signals that Congress recognizes how complex crypto taxation was before 1099-DA.

Operation Choke Point 2.0 is not a fringe conspiracy theory—it is a documented, coordinated regulatory effort to systematically debank the digital asset industry. Congressional hearings and industry reports confirm that federal banking regulators have applied immense backroom pressure on traditional financial institutions to cut ties with crypto businesses. The playbook is subtle but devastating: instead of making digital assets illegal, agencies issue "informal guidance" warning banks of the heightened liquidity and reputational risks associated with the crypto sector. The result? Banks preemptively terminate ACH access, block wire transfers, and abruptly close accounts for crypto-native companies and high-net-worth investors to avoid regulatory crosshairs. Here is what this means for your personal wealth and entity structuring: You do not need to be a bad actor to lose your bank account. If your crypto accounting is undocumented, or if your fiat off-ramps look unstructured, your bank's compliance department will simply drop you rather than risk regulatory scrutiny. Without reliable banking rails, your paper wealth is effectively trapped. An unexpected account closure can freeze your capital, halt estimated tax payments, and force you into sub-tier, high-fee payment processors. The only defense against forced debanking is unassailable transparency. Your entity structure, source of funds, and tax reporting must be pristine enough to satisfy the most aggressive traditional banking underwriter. In an environment where regulatory pressure flows directly through traditional financial rails, institutional-grade documentation is no longer just good accounting, it is the baseline requirement for maintaining banking access. Protect your liquidity, eliminate ambiguities in your transaction records, and ensure your fiat bridges are resilient before the next compliance sweep quietly shuts the door.