The Internal Revenue Service is asking the public to weigh in on a plan to tax some non-fungible tokens like it taxes tangible collectibles, such as art or precious metals. Taxpayers have until June 19th to comment on the proposal.
NFTs are currently treated as property for income tax purposes. Under current rules, f you sell an NFT for less than the amount you paid, it can be used as a loss to offset profits earned from other investments, known as capital gains. Capital gains are typically taxed at a lower rate.
The IRS currently defines a “collectible” as tangible personal property. Sellers may face a higher tax bill if the definition is updated to include NFTs as a collectible for tax purposes.
For more information see Cheyenne DeVon “The IRS may tax certain NFTs at a higher rate in the future— here’s what to know” CNBC Make It, April 7, 2023.
Special thanks to David S. Luber (Florida Probate Attorney) for bringing this article to my attention.