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.

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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Interesting NFTs
Another Day In Paradise
Just as the book speaks to intelligence, the image in all its muteness speaks to the heart.
GENCAT
Ciao! I'm GENCAT. I'm a professional Dogwalker and I love salad. My secret indulgence is cereal. Let's pawty!
The Scion
A young figure caught in a moment of distraction, aware only ephemerally of his unconscious being, as it engages in psychological and psychedelic layer spaces. His right arm casually cradles a moray eel; the figure is comfortable but not truly aware of the potentials for danger in such negligence. His shirt reads “Bello” in Pokemon style font, harkening back to a childhood straddling the millennial threshold. To his right side, out of the unconscious deep, shrouded alien heads propagate as a fractal totem, each new iteration a more sophisticated rendering of emotional masking over the cold mystery of the greys. As the scion of the Budgie-Sattva, the young man, in his distraction, is also simultaneously aware of higher levels of self discovery. To his left a psychological topology sets beneath the oracle side of an 8 ball ,hovering; its message a purest concept of acceptance. The “Scion” lettering is in 80’s HeMan style bold declaration. The lower right side of the painting is like a hybrid of melon, feathers, and seeds. The crystals in the background bring light; conducted, refracted, reflected, and dispersed, to balance the dark shadow of the figure’s physical body. The aura of the scion succeeds in layers to point, with a finger, and the crown chakra, toward a center of a mandala existing as nigh pure application of strokes, in essence painterly abstraction, but also revealing hints of the Aura of migraine, and the bi-hemispherical nature of the brain–noting concerns of the possibility of inherited mental disease. Yet the flourish of chakra as it sets against that center is robust, active, coherent, and reveling against all fear. Fundamentally, the piece speaks to the activation of one’s potential to begin to “Know Thyself”, and find greater awareness out of the enigmas of the mind–as an inculcated seed given to the rich soil of one’s own birthright.
Faceplant
Facebook logo factory. 3D animation, 10-second loop, 30 fps. Created using Cinema4D, X-Particles, TurbulenceFD, Octane, and After Effects. Originally posted on TikTok (@jigpx) on 1/4/21. 38.7m+ views, 2.1m+ likes (as of 4/22/21).
Right Place & Right Time (bitcoin hourly price offset)
Each day, a new composition for the Master is generated autonomously using a data feed of Bitcoin's last 24 hours of price action. Each hour's price programmatically controls rotation, scale, and position of a correlating layer. Astute viewers will surmise the day's price volatility simply by examining the artwork. While the daily image generation is the result of autonomous API calls, utilizing an algorithm the artist wrote, the artist has chosen to retain a control token. This token allows him to fine-tune variables associated with his algorithm, in addition to addressing aesthetic concerns within the life-cycle of the artwork. Layer state, alpha, hue, saturation, and brightness are elements the artist has retained control of in order that this artwork remain a living work-in-progress. An earlier iteration of this artwork was featured as a nightly projection mapping video on the face of the Daniels Fisher Clocktower, as part of ETH Denver 2020. Access to this and additional exclusive content awaits the master token owner at the artist's NFT Portal: https://collect.mattkane.com/minted-works/right-place-right-time-bitcoin-hourly-price-offset/