As cryptocurrency and digital currency takes off, many people have gotten into NFTs this year. Do you need to pay taxes on them?
NFT artists and investors need to look into what’s expected of them as this type of currency grows.
NFTs are digital art in the form of art that investors find monetary value in.
NFTs are a form of non-expendable property
Cash and dollar bills are a form of fungible good.
Non-fungible goods are like art that cannot be exchanged or substituted for another. They are exclusive.
Non-fungible tokens explained
NFT stands for non-fungible token.
It’s use is based similarly to how cryptocurrency works, except crypto is fungible currency.
These forms of digital payment have a digital certificate of ownership and and may not be duplicated. It’s one of a kind or one of very few.
IRS and NFTs
Some tax laws are implemented when it comes to non-fungible tokens.
If you sell a non-fungible token, then you as the artist must report your income you received.
If you’ve invested the you must have it taxed as property.
This means selling, trading, or purchasing NFTs must be reported to the IRS.
How does taxing non-fungible tokens work?
If you’re an artist you must report your income so it’s taxed an the normal rate of 10% to 37%.
Your self employment taxes will be 15.3%.
If you’re an investor and own any of these as property, you’re subject to a tax rate of 0% to 20%.
Any NFTs that act as stamps, antiques, or trading card they will be taxed at a rate of 28%.
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