NFTs to be taxed like other collectibles by the IRS
According to a document published Tuesday, the U.S. Internal Revenue Service is considering taxing non-fungible tokens (NFTs) on a par with other collectibles like stamps, works of art, and fine wine, a move likely to affect those who include digital assets in their retirement plans.
In addressing a vacuum that has left some taxpayers wondering about their tax obligations, the proposed guidance represents the first step by the U.S. tax authority in a long time to clarify the tax treatment of digital assets.
The IRS and Treasury Department are seeking input regarding the upcoming guidance on tax treatments for Non-Fungible Tokens (NFTs) as collectibles under the tax law. This could lead to a less advantageous application of capital gains tax rules, as well as implications for NFTs bought by individual retirement accounts. People have until June 19 to comment on the proposal, particularly in terms of defining when an NFT counts as a work of art. In the meantime, the IRS declares that they will treat any NFTs with respect to their asset type, be it artwork or gemstone.
NFTs will be taxed like the underlying assets until final rules are agreed on how to treat digital proofs of ownership held in retirement accounts.