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IRS Proposes New Guidance Around NFT Classification That Would Increase Taxes
As reported by Blockworks in their March 23, 2023 publication, the Department of the Treasury and IRS issued a new notice proposing most NFTs be taxed higher than securities and other assets.
Certain NFTs should be classified as collectibles, the agencies suggested in the notice issued this week.
Net capital gains tax from selling collectibles for a profit can be as high as 28% for the highest earners, per IRS code. Capital gains taxes on securities and other goods generally range from 15% to 20%.
The notice states that NFTs could be classified as collectibles if the associated right or asset is a collectible. For example, stamps are collectibles under US tax code, so an NFT tied to ownership of a stamp would also be a collectible. The IRS calls this reasoning the “look-through analysis.â€
“The [analysis] will be instrumental in an investor’s individual NFTs being classified correctly on one’s tax return as well as taxed at the correct rate rather than lumped into one rate and only one classification,†Gabriel Brin, vice president of tax and accounting product at Ledgible, told Blockworks in an interview.