Mining, Opinion

How Biden’s American Families Capital Gains Plan Could Propel Bitcoin to $100K

May 20, 2021

U.S. President Joe Biden is reportedly planning to nearly double capital gains tax rates for high-earning individuals through a new bill. This move would increase the attractiveness of Bitcoin mining, profits from which are taxed as income, rather than as capital gains.

Should Biden’s proposal pass, capital gains, which apply to profits gained from the sale of an asset or investment, will be taxed at 39.6%, substantially higher than the current base rate of 20%. Those with annual earnings above $1 million may face rates as steep as 43.4% when paired with the existing investment income surtax, considerably higher than the proposed income tax rate of 39.6% for the highest tax bracket.

The bill is part of Biden’s American Families Plan that targets increased social spending to address deep-rooted financial inequality. This proposal has the potential to reverse the existing structure under which investments are taxed lower than labour, a provision that has inequitably helped the wealthy pay lower tax rates than middle-class families. Utilizing funds gained from this act, the government plans to increase spending on education and children.

A Significant Advantage during Tax Season

While cryptocurrency holdings are still taxable as capital gains, returns from crypto mining are considered by the IRS to be regular income. This discrepancy may cause the nation’s wealthiest individuals to respond by investing in mining equipment to escape the higher tax rate, as opposed to leaning on traditional investments such as real estate. This further divestment by the wealthy out of fiat currency may just be the catalyst needed to push Bitcoin’s price to the long-awaited $100,000 milestone.

As mining becomes a haven for wealthy taxpayers, demand for Bitcoin mining equipment will skyrocket, presenting a lucrative opportunity for those who already own it. Bitcoin miners are also depreciable on tax returns as they utilize computer hardware, providing a 100% depreciation allowance that any computer property purchased or put to use after September 2017 qualifies for. This provides another advantage during tax season while simultaneously avoiding the inflated capital gains tax rates. Bitcoin miners guarantee a return on investment (ROI) as there is a year-round demand for verifying Bitcoin transactions.

Maximizing Profits with a Secure Investment

The process can be compared to purchasing a computer and having a line of customers waiting to use it every second of the day, until the hardware breaks. Most Bitcoin hardware is built with CPU power, or processing power, similar to that which is found in computers and can easily last up to a decade. Bitcoin mining equipment is superior in this case as the hardware is not susceptible to breaks or internal functionality damages, making it a safe and consistent investment that appreciates to higher than its purchase price should the price of Bitcoin increase, as it has been doing as of late. As this price increases and the mining rig produces more money, your profits are maximized with many rigs going for under $10,000: a stark comparison to Bitcoin’s direct market price which has seen to jump to over $55,000.

If you are earning over $1 million and invest in mining equipment, this development provides the potential to move on this opportunity and mine back the full amount to get a full return on your investment. All profits would then be subject to ordinary income tax rates, rather than the capital gains tax rate.

Get Started with a Trusted Resource

Should this bill pass, it will reveal an opportunity to invest in mining equipment before the market hits record highs. In that situation, investors in Bitcoin mining will want to be partnered with an experienced company that they can trust, a role that Wattum is capable of filling. Wattum Management, a Bitcoin mining farm management company, sells a variety of mining equipment, alongside firmware and their hosting, management, and mining pool services. Their premium miners boast high hashrates, competitive timelines for your return on investment, and power efficiency which is guaranteed to help customers maximize their profitability.

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