NFT Sales Taxation

If you sold NFTs in 2021, that sale needs to be reported on your 1040 income tax form. You might not owe tax, but you still have to report it. To add confusion, the tax rate you’ll pay still isn’t clear. In February 2022, with the tax season in full swing, the IRS has not yet specified if NFTs should be considered asset sales subject to capital gains rates OR collectibles subject to a flat 28% collectible rate. That determination could make a big difference to how much you owe in tax. This kind of vagueness seems uncharacteristic of the IRS, but remember that gray area when you went from little kid to teenager, and it took your parents a while to figure out new rules? Crypto and NFTs are also in their adolescence, and it seems like the powers-that-be are still wishing that digital assets hadn’t grown up so fast. Nostalgia aside, the IRS taxes profits from digital assets and collectibles, so if you had crypto or NFT sales, you have to account for those activities to the IRS even if it hasn’t clearly defined how.