NFT Tax Guide

While NFTs and cryptocurrencies are hot topics in the news, understanding the tax implications of NFT transactions is far from clear. If you're involved in buying, selling, or creating NFTs, you need to understand how these transactions affect your tax obligations.

How the IRS Views NFTs

The IRS treats NFTs as property, similar to other digital assets and cryptocurrencies. This classification means that NFT transactions can trigger taxable events, including capital gains or losses when you buy, sell, trade, or dispose of NFTs.

Taxable NFT Events

• Selling an NFT for more than you paid (capital gains)
• Trading one NFT for another NFT
• Using cryptocurrency to purchase an NFT
• Receiving NFTs as payment for goods or services
• Creating and selling original NFTs
• Gifting NFTs (may trigger gift tax implications)

NFT Creator Tax Implications

If you create and sell NFTs, the income from these sales is generally treated as ordinary business income, not capital gains. This means NFT creators may be subject to self-employment taxes in addition to regular income taxes.

Record Keeping for NFT Transactions

Maintaining detailed records is crucial for proper NFT tax reporting:

• Purchase date and price of each NFT
• Sale date and proceeds from NFT sales
• Transaction fees and gas costs
• Fair market value at time of receipt or creation
• Blockchain transaction records