The IRS has released updated tax guidelines that will allow NFT holdings to be subject to the same tax regime as cryptocurrencies and stablecoins. NFT investors have new clarity from the U.S. Internal Revenue Service about how assets will be taxed.
According to the IRS’ 2022 tax year guide all “digital assets,” which include stablecoins and non-fungible tokens, as well as cryptocurrencies, will be subject to the same tax rules.
This is a departure form 2021 guide, which used the less specific term “virtual currency” and only defined the rules governing cryptocurrency and stablecoins.
Taxpayers who “disposed of any digital assets in 2022” by selling, exchanging, gifting, or transferring them will need to report the event and pay capital gains taxes.
Anyone who has received NFTs in compensation for services, or sold any digital assets they owned for profit will have to declare it as income.
The IRS seems to have carefully drafted the document, which allows for future taxation of any new class of digital assets. According to the IRS, if a particular asset is classified as a digital asset, it will be taxed for federal income tax purposes.
It’s worth noting the IRS also made the decision not to classify NFTs as “collectibles”–alongside assets like collectible art, antiques, or gems–which are taxed at a different rate than stocks or bonds.
Collectables are subject to 28% tax, while assets like stocks, bonds or cryptocurrency are subject to 0%, 15% or 20% tax depending on the seller’s income.
Crypto investors are now seeing tax loopholes closing. At least, this is the case in many countries. As more countries clarify how digital assets will be taxed, it seems that these loopholes are being closed.
Portugal was once considered a safe haven by crypto investors. In October 2022, 28% capital gains tax was introduced on cryptocurrency gains within one year.
Not only tax authorities could be looking to take NFTS investors’ profits.
Apple made the decision to allow in-app NFTs on its platform in September. These transactions would, however, be subject to a 30% commission fee. This was much to the dismay of many NFT communities.