- The US Internal Revenue Service has reviewed its tax guidelines to include NFTs
- The agency now considers NFTs to be similar to cryptocurrencies when it comes to tax obligations
- IRS has also deviated from using the term “virtual currency” and adopted “digital assets” in the reviewed tax guidelines, which are still in the draft stage
The US Internal Revenue Service (IRS) has reviewed its tax guidelines for crypto traders to include NFTs. According to the changes, NFT investors will follow the same tax guidelines as crypto holders. The draft changes have also erased the term “virtual currency” and replaced it with “digital assets” to help net more services or products offered in the blockchain world.
NFTs and Crypto to Follow the Same Tax Rules
In an array of proposed changes targeting the cryptocurrency space, the IRS made a deliberate mention of NFTs, noting that it’s a “digital representation of value” living on a blockchain-based platform or any other cryptography-based distributed ledger.
According to the tax regulator, digital assets include everything from NFTs, stablecoins and cryptocurrency, implying that they’ll all be taxed using the same rules. The 2022 IRS tax guide deviates from last year’s provisions that only included stablecoins and virtual currencies. If the draft changes are finalised without changes, getting paid for services or products using NFTs will constitute an income.
NFT Income Attracts up to 20% Tax
The IRS also considers proceeds from selling an NFTs as income, as it does with other virtual assets. These assets are subject to capital gains tax of between 0% and 20% for items held for longer than a year.
It’s worth noting that the taxman seemed to intentionally avoid classifying NFTs as collectibles which would attract a 28%-tax, similar to antiques and gems. Although the new NFT tax guidelines are yet to be ratified, it’s clear the U.S. government is keen on getting a share of the profits made in the blockchain space.
