One of the challenges that come with novel assets like NFTs is how exactly taxes are to be paid on them. After all, most existing tax codes were created long before NFTs were even in existence. As such, the treatment of NFTs under tax codes is a question that lingers all over the industry.
Luckily, the U.S. Internal Revenue Service (IRS) has given more clarity to this with its updated tax codes.
The new draft that the IRS released offers some clarification for those who file with form 1040. More specifically, the terminology used for one of the asset classes has been changed from “virtual currency” to “digital assets.” Not only has this name been changed but the document explicitly mentions NFTs and notes that they are included.
“Digital assets are any digital representations of value that are recorded on a cryptographically secured distributed ledger or any similar technology. For example, digital assets include non-fungible tokens (NFT) and virtual currencies, such as cryptocurrencies and stablecoins,” the document says.
This move clears up a lot of potential confusion about the place of NFTs within tax proceedings and means that those who invest in them can stay on the right side of the law.
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Tokoni Uti has written extensively on blockchain and cryptocurrency for years. Her work has appeared on sites like BTCmanager and Blockchain Reporter. She has a degree in Corporate Communications.
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