TL;DR

• The IRS and U.S. Treasury Department are planning to tax NFTs similarly to physical collectibles (similar to: art, coins, antiques, alcohol).

• That would mean short term capital gains tax would be capped at 28%, instead of 37%.

• Though, the IRS has said it may preclude NFTs from IRAs (meaning you can't add/keep them in your retirement account).

• But NFTs represent more than just collectibles (think: event tickets, game passes, homes, Web3 domain names), so bunching them all into one tax bracket feels...reductive?

Full Story

Fair warning, this article is about taxes.

Up-bup-bup! Before you scroll away: it's mostly good news and it applies to NFTs. So if you're a collector, you might want to hear us out.

The IRS and U.S. Treasury Department are planning to tax NFTs similarly to physical collectibles.

Think: art, coins, antiques, or that 50 year old bottle of whiskey that you & your friends stole from your dads cellar, drank, and made him cry:

"That was a retirement gift from my late faaaather!"

(Damn, that got dark, quick).

Ok, back to taxes: here's the good, the bad, and the 'grey' of it all.

The good.

Right now, if you hold your NFTs for less than a year, any sale is taxed between 10% - 37%. But if they were to be taxed as collectibles, that percentage would be capped at 28%.

Which is a nice little ceiling. But you know what's better than that?

The way they're going about it:

(@SEC, ya'll taking notes? ☝️)

The bad.

The IRS has said it may preclude NFTs from IRAs (meaning you can't add/keep them in your retirement account).

...ok, sure - not the best - but not too big of deal.

The grey.

Here's where it gets murky.

See, NFTs are just 'digital certificates of ownership.' They often certify the ownership of digital collectibles, yes. But they also do a lot more...

They represent ownership of: event tickets, game passes, homes, social club memberships, loyalty points, Web3 domain names/social handles etc.

To bunch all of these into one tax bracket feels...reductive? Over simplified? Inaccurate in its representation?

We can't find the perfect wording, but you get where we're headed.

That said, if you're the IRS - how the hell do you denote/check whether an NFT is better fit to a different bracket?

(We can understand why a single classification is being presented).

Anyway - that's the news. Now you know!