IRS Plans for NFT Taxes Guidelines
The U.S. Internal Revenue Service (IRS) has announced it is looking to take feedback on the taxation of non-fungible tokens (NFTs).
The Treasury Department and the IRS issued a notice about the tax treatment of Non-Fungible Tokens as collectibles. It seeks feedback on whether to tax NFTs under Section 408(m) of the Internal Revenue Code.
The IRS is open for comments till June 19.
Look-Through Analysis for NFT Taxes
The IRS wants to examine if a particular NFT falls under the collectibles category through a “look-through analysis.” That means it should pass the definition of collectible in the tax code.
It explains, “A gem is a collectible under section 408(m); therefore, an NFT that certifies ownership of a gem is a collectible.”
28% Long-Term Capital Gain Tax Could be Imposed
Shehan Chandrasekera, the head of tax strategy at CoinTracker, told BeInCrypto, “This notice provided a lot of clarity to an area we had not seen any type of guidance before. The guidance is not final but their analysis helps us think more clearly about NFT taxes.”
However, he believes this is not necessarily great news for someone trading NFTs classified as collectibles. Shehan explains, “If an asset is taxed as a collectible, you could be subject to a higher long-term cap gain tax rate (28%) than the regular 20% long-term rate non-collectible assets are subject to.”
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BeInCrypto has reached out to company or individual involved in the story to get an official statement about the recent developments, but it has yet to hear back.