NFTs could soon be taxed as collectibles under the US tax code if the United States Internal Revenue Service (IRS) You decide to continue on your planned route. However, before anything is finalized, the IRS is seeking public input on how NFT taxes might work. Therefore, people who have or have interacted with non-fungible tokens are invited to share their opinion on the subject. All comments must reach the agency by June 19.
He warning was issued by the IRS on March 21 and asks for comment on how best to tax NFTs in a way that is favorable to the people who interact with them. Given the growing popularity and use cases for NFTs, the IRS is hell-bent on grabbing a piece of the burgeoning industry.
The agency introduced crypto tax guidelines in 2014, defining digital assets as property. However, it appears that these guidelines are not applicable to NFTs. According to the IRS, collectibles under US tax law do not have the benefits of “Tax treatment of capital gains like other capital assets”.
Remember: All taxpayers must answer the digital asset tax return question, regardless of whether they participated in any of those transactions. See more information about #IRS in: https://t.co/0tjkS0BBO1 pic.twitter.com/fmdG7ZdeAn
– IRS News (@NoticiasdelIRS) March 20, 2023
IRS position on NFT taxes
The notice adds, “Until further guidance is issued, the IRS intends to determine when an NFT is treated as a collectible through the use of ‘review analysis.’ Under the review analysis, an NFT is treated as a collectible if the NFT’s associated right or asset falls within the definition of a collectible in the tax code.”
That being said, the US tax code stipulates that the sale of collectibles, such as works of art, is likely to attract the maximum capital gains tax rate of 28%. It is a rate that could be applicable to NFTs if the proposed guidelines are approved.
Interestingly, the IRS has been contemplating the best way to tax NFTs for a while. Last October, the agency introduced a bill proposing that NFTs and cryptocurrencies be widely reported. “Digital Resources” set aside for tax purposes. Now it remains to be seen how the feedback they receive will affect their guidelines.
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*All investment/financial opinions expressed by NFT Plazas come from the personal research and experience of our site moderators and are intended for educational purposes only. People are required to fully research any product before making any type of investment.
Basil is an avid fan of blockchain technology and all its innovations, and he is passionate about sharing this narrative with his audience. He has spent over five years in the crypto space, specializing in research and creating Web3 content for various media outlets around the world.
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