The Basics of NFTaxes
The NiFTy Chicks will be kicking off a short series related to everyone’s favorite topic taxes. In this episode, JeNFT will be sharing with you some key things to know when buying and selling NFTs.
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- Not a CPA, accountant, or tax attorney. Our goal is to share what we know and what we’ve learned as we’ve embarked on the NFT journey.
- We encourage you to seek professional advice by those who are trained and qualified when it comes to the specifics of your taxes.
- This overview is specific to US residences though these types of tracking tools might be helpful to you regardless of where in the world you live.
Cryptocurrencies and NFTs are considered property and taxed as such.
Creating an NFT does not trigger a taxable event
Taxable event occurs when:
- Selling or otherwise disposing of an NFT for a fungible cryptocurrency
- Purchasing an NFT with cryptocurrency
- Trading an NFT for another NFT
Your personal tax rate depends on:
- How long you’ve held the asset or property or NFT
- What your filing status is (ie. single, married filing jointly, married filing separately)
- How much income you make per year
Assets bought and sold within 1 year are considered short-term and will be taxed as the short-term capital gains rates.
Assets bought and held over 1 year prior to being sold will be taxed at the long-term capital gains rates.
Additional state taxes may apply depending on the state you live in.
Filing your NFT proceeds will be submitted on your Form 8949 (not 8940 as reflected on the screen during our show). You will be the following data points when filling out this form:
- Description of the NFT
- Date acquired
- Date sold
- Proceeds
- Cost basis
- Gain or loss
An easier way to track your transactions are by utilizing tax-specific software such as:
- CoinTracker – try it for FREE
- Coinledger – get started for FREE, Our pricing tiers fluctuate based on the number of transactions made during a given tax season.
- ZenLedger – get started for FREE, Competitively priced plans to meet your specific trading needs. Access the report forever, so you can always update or add transactions before printing and filing your tax forms.
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