NFTs may be treated as collectibles for tax purposes
March 23, 2023
Do you own nonfungible tokens (NFTs)? If so, you need to know that the IRS intends to treat certain NFTs as collectibles for tax purposes. Generally, collectibles do not have advantageous capital-gains tax treatment as other capital assets.
According to the IRS, an NFT is a unique digital identifier that’s recorded using distributed ledger technology and may be used to certify the authenticity and ownership of an associated right or asset. A token is an entry of data encoded on a distributed ledger. A distributed ledger can be used to identify ownership of both NFTs and fungible tokens, such as cryptocurrency.
In Notice 2023-27, the IRS details how it intends to determine whether an NFT is a collectible. For more information from the IRS, click here.