NFTs or non-fungible tokens are used to secure exclusive ownership of a digital asset. It can be a work of art, a tweet or a video game. They are mainly used in the field of art. Over the past few months, the NFT market has developed well. However, the laws regarding the taxation of NFTs are not yet clearly established. This situation leads to speculation as to the exact amount of tax charges payable by investors.
What explains the rise of NFTs?
NFT technology is very popular in the field of art. Indeed, it allows certify or authenticate a virtual object. Thus, she can be recommended to you if you want to buy a tweet or a piece of a digitized fresco. It is also useful when it comes to reselling autographed cards of football players.
Thanks to NFTs, you have the possibility of obtaining an authentic and unforgeable certificate of the purchase made. NFT technology therefore allows you to have a digital title deed to attest to the uniqueness of your property.
Note that this new possibility prevents the duplication of works of art. In doing so, NFTs allow creators or artists to make a living from their creation. Consequently, we are witnessing a increase in total sales value virtual object certificates. Chainalysis estimates that the non-fungible token market has reached $44 billion. This growth aroused the interest of the American government, which hoped to afford part of the profits of this new industry.
What is the tax rate for NFTs?
Regarding the taxation of NFTs, no law has been defined precisely to set the exact amount of taxes to be paid. However, NFT investors and creators expect to face billions of dollars in taxes and at rates that could reach 37%.
Note that the absence of legal texts pushes NFT collectors to calculate the amount of their tax themselves. This situation also causes investors to forget about respecting their obligations. The latter are therefore exposed to penalties in case of control of the IRS.
In reality, the absence of a precise text does not exempt from the payment of tax. “You don’t have the right not to report your gains or losses because the IRS hasn’t provided guidance that meets your expectations,” said San Francisco-based tax attorney James Creech.
“With so much money at stake, the IRS will likely be forced to clarify the rules, but it may also start to control people,” explained Michael Desmond, former chief adviser to the IRS, now a partner at Gibson, Dunn & Crutcher.
While the NFT market is in full development, it is beginning to appeal to retail investors as well as institutional investors. As a result, it becomes essential to put in place new rules to organize it and for users to pay taxes.
Receive a summary of news in the world of cryptocurrencies by subscribing to our new daily and weekly newsletter service so you don’t miss any of the essential Cointribune!
Behind the generic signature “TCT Writing” are young journalists and authors with specific profiles who wish to remain anonymous because they are involved in the ecosystem with certain obligations.