The IRS said it plans to issue guidance on treating non-fungible tokens, or NFTs, as collectibles under U.S. tax laws. In a March 21 notice, the IRS called on the American public to provide feedback on how NFTs could be taxed as collectibles. According to the government agency, collectibles under U.S. tax law “do not enjoy the favorable capital gains tax treatment that other capital assets do,” which appears to be a reference to the way crypto assets are currently taxed in the country.
"Prior to issuing additional guidance, the IRS intends to determine when NFTs are considered collectibles by using 'pivot analysis,'" the notice said. "According to the perspective analysis, if the related rights or assets of NFT meet the definition of collectibles in tax law, then NFT will be regarded as collectibles."
Under U.S. tax law, the sale of collectibles such as coins or art is subject to a capital gains tax of up to 28%. Proposed IRS guidance could apply the same standard to NFTs that prove ownership of coins, artwork, or similar collectibles. The IRS has until June 19 to submit comments, so U.S. taxpayers who need to file their 2022 returns by the April 18 deadline may not be affected. The form requires anyone who receives, earns, transfers, or sells cryptocurrency to tick an affirmative box to properly report their taxes and, depending on who is filing, report the transaction as capital gain or income.
In October, the IRS introduced a draft bill proposing to report NFTs and cryptocurrencies for tax purposes under the broad “Digital Assets” section. Generally, U.S. taxpayers are not required to report all digital assets if they hold them for a full year or transfer them between wallets they control.
