The U.S. Internal Revenue Service (IRS) is reportedly working on tax rules for non-fungible tokens (NFTs), and if they are classified as collectibles, long-term capital gains could be subject to a 28% tax rate. This rate is higher than the 20% rate that applies to other capital assets.
The IRS said that “Treasury and the IRS are considering the extent to which digital files may constitute ‘work of art.'” Feedback on the issues outlined in the notice will also affect how the regulator defines “any work of art.”
Popular NFT collectibles such as Bored Ape Yacht Club and Crypto Punks are likely to be classified as collectible art, meaning their owners may pay higher long-term capital gains taxes when sold. This development has caught the attention of NFT investors and collectors, as well as the broader digital art community.
The potential 28% tax rate on NFT earnings is expected to have a major impact on the NFT market, which has exploded in recent years.
However, it is important to note that the rules are still being developed and are subject to change.
The IRS has yet to release specifics on how the NFT tax rules will be implemented, but experts predict it may depend on factors such as the value of the NFT, how long it is held and for what purpose it is held. It was acquired.