The esteemed US Internal Revenue Service, the authoritative entity entrusted with collecting federal taxes, has proposed a tax on non-fungible tokens (NFTs), deeming them as collectibles. In a joint effort with the Treasury Department, a document was unveiled on March 21st, 2023, soliciting feedback from the public on this proposal.
The IRS has made a noteworthy announcement in its proposal, stating that they are actively seeking feedback on the tax treatment of NFTs. Their call for input demonstrates a commitment to staying informed and up-to-date on the latest developments in digital assets.
Today’s guidance also requests comments on the treatment of NFTs as collectibles and describes how the IRS intends to determine whether an NFT is a collectible until further guidance is issued.
Furthermore, the agency has assured that the IRS will employ a meticulous “look-through analysis” to ascertain whether an NFT qualifies as a collectible until additional guidance on the proposal is released. Specifically, an NFT will be classified as a collectible “if the associated right or asset of the NFT aligns with the definition of collectible in the tax code.”
The department’s proposed guidance marks a pivotal moment in the US tax authority’s efforts to clarify the taxation of NFTs. This crucial step is aligned with President Joe Biden’s administration’s commitment to promoting transparency in treating crypto assets.
The Internal Revenue Service (IRS) outlines the definition of non-fungible tokens (NFTs) as a distinctive identifier documented through distributed ledger technology. This identifier serves to verify the genuineness and proprietorship of a related asset or right.
Additionally, the department has announced that it anticipates receiving public feedback regarding any facets of NFTs that may impact their classification as collectibles. All comments must be submitted by June 19th.
