IRS Considers NFT Taxation Like Other Digital Collectibles

The United States Internal Revenue Service (IRS) is reportedly considering whether non-fungible tokens (NFT) should be taxed like other digital collections. Accordingly, the move by the tax agency is expected to impact the type of digital assets people now include as part of their retirement plans.

IRS Proposes NFT Taxation

The latest development signifies the first attempt by the US tax body to clarify how it intends to treat digital assets as taxable products, which reportedly addressed the uncertainty some taxpayers echo.

However, the IRS and the Treasury Department are soliciting public feedback concerning the tax treatment of NFTs as a collectible under existing tax regulations. The tax body revealed that it currently treats all NFTs like other underlying crypto assets.

Last October, the IRS reportedly expanded its instructions on tax forms to include NFT as speculations became rife that the agency would start taxing digital collectibles. As more people interact with blockchain technology and its underlying assets, the call for a crypto tax keeps getting louder.

Capital tax gain, previously exclusive to participants in the traditional finance system, might become applicable to crypto users soon.

Will Crypto Holders Pay Tax?

Many digital finance experts believe the time for crypto tax is drawing nearer. However, tax bodies in most jurisdictions, especially in the United States, are asking for more time as they await clearer rules on regulating the broader crypto marker.

Despite the reluctance of a few, many in the crypto community have surprisingly shown that it is ready to embrace taxation on transactions. Observers say crypto users need clear rules to pay their taxes since most wallet owners are law-abiding citizens.

Despite efforts to clarify crypto tax filing for years, regulatory bodies need help to keep pace with the technical innovations that hold sway in the Web3 ecosystem. Experts noted that things become more complex considering how the metaverse and Web3 function and how they differ from Web2.

On the other hand, tax bodies believe crypto and traditional finance differ from each other players in each sector file their taxes.