Are Your NFTs Safe from the IRS? The Shocking Truth Behind New Tax Proposals
Non-fungible tokens (NFTs) may be taxed on par with other collectibles, such as fine wine or works of art, according to a recent document published by the U.S. Internal Revenue Service.
This move could impact taxpayers who have included NFTs in their retirement plans.
The proposed guidance is the IRS’s first effort to clarify the tax treatment of digital assets in some time, filling a void that has caused confusion among taxpayers.
The IRS and the Treasury Department are currently requesting feedback on forthcoming guidance related to the tax treatment of NFTs, according to a Coindesk report.
This guidance implies NFTs may be treated less favorably under capital gains tax rules.
Additionally, the statement notes that there may be implications for individual retirement accounts that acquire these assets.
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The IRS is seeking comments on the proposal, including on matters like when an NFT is considered a work of art.
In the meantime, the tax authority is treating NFTs like their underlying assets, such as artworks or gemstones.
Last October, the IRS expanded its instructions for tax form filers to include NFTs and cryptocurrencies.
As stated by the IRS in the document, “The Treasury Department and the IRS are aware that there may be uncertainty regarding the proper tax treatment of a NFT acquired as a personal asset, an investment asset, or in the course of conducting a trade or business.”
The new guidance is intended to provide clarity for taxpayers and to ensure consistent tax treatment of NFTs across different taxpayers.
The IRS is currently accepting comments on the proposal until June 19, 2023.
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