18/11/2022 Do You Owe Taxes on Your NFT?

Here are the NFT-related rules of thumb to consider when filing your 2022 taxes.

CDCROP: non fungible tokenabbreviated as NFT in white letters on red dice against the background of dollars. new way to get rich (Getty Images)

To date in 2022, the NFT market has seen more than 8.61 ETH in trading volume across 2.7 million wallets. According to CoinMarketCap, the sector’s total market cap amounts to over $13 billion. And yet, despite the industry’s astronomical size and continued growth, there remains a lack of clarity around NFT taxation for both creators and collectors alike.

For the 2022 tax year, the Internal Revenue Service updated Form 1040 and replaced the term “virtual currency” with “digital assets,” a broader label to encompass both NFTs and cryptocurrencies. The IRS treats digital assets as property, meaning they are subject to capital gains tax rates.

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While the guidance remains somewhat murky, below are the general NFT-related rules of thumb to consider when filing your 2022 taxes in the U.S. Note that there is not yet any official guidance from the IRS on commissions orroyalties received from downstream NFT resales, but they would most likely be considered income.

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Christmas Sleigh
First Christmas-themed Visual Toy. For this work the artist has created a fantastic sleigh, ornamented in detail and with all the Christmas spirit that transports us to childhood, illusion, innocence. With its gift wrapping machinery, its Santa, a snow globe, the nutcracker, the European-style village and its soundtrack (first time with music) it is a whole Christmas mosaic for the imagination.
Flamingo Jaguar! Super RARE
Good morning! My name's Flamingo Jaguar! Super RARE. I once peed on Confucius's cat. They had it coming. In my free time, I can usually be found fabulous or practicing witchcraft. Can you make my hairy dreams come true?
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OWNER: Sir Tim Berners-Lee Sir Tim Berners-Lee, b. 1955 Source Code for the WWW 1990-1991 Work includes: Original archive of dated and time-stamped files containing the source code, written between 3 October 1990 and 24 August 1991. These files contain code with approximately 9,555 lines, the contents of which include implementations of the three languages and protocols invented by Sir Tim; HTML (Hypertext Markup Language); HTTP (Hyper Transfer Protocol); and URIs (Uniform Resource Identifiers), as well as the original HTML documents that instructed early web users on how to use the application Animated visualization of the code being written (Video, black & white, silent), lasting 30 minutes 25 seconds A Scalable Vector Graphics (SVG) representation of the full code (A0 841mm wide by 1189 mm high), created by Sir Tim from the original files using Python, with a graphic representation of his physical signature at lower right A letter written in the README.md file (in “markdown” format) by Sir Tim in June of 2021, reflecting upon the code and his process of creating it Non-fungible Token ERC-721 Minted on June 15, 2021, ed. 1/1 Smart Contract Address: 0x86ade256037d80d6d42df8df96d5be21cd25bd8f
ℤ
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