IRS announces key changes for NFTs in latest tax guidelines

October 28, 2022

By Anjali Kochhar

The United States Internal Revenue Service (IRS) has released an updated draft of the 2022 tax form which has provided clarity regarding the guidelines for taxes pertaining to the crypto industry, more particularly for Non-Fungible Tokens (NFTs).

According to the new guidelines, the word “virtual currency” has been replaced with “digital assets.”

This effectively brings NFTs under the same umbrella as cryptocurrencies and stablecoins, subjecting a similar tax on digital art.

“Digital assets are any digital representations of value that are recorded on a cryptographically secured distributed ledger or any similar technology,” the draft read.

“For example, digital assets include non-fungible tokens (NFTs) and virtual currencies, such as cryptocurrencies and stablecoins” it further read.

To this end, IRS’s 1040 tax form for 2022 will feature a separate section where taxpayers will be required to disclose their digital asset holdings.

2022 has seen dozens of big brands foraying into the world of digital art. From fashion to entertainment and even the auto industry, several partnerships have been announced and trademark applications for NFTs have been filed.

According to a report by Statista, revenue from NFTs is projected to reach $731 million by the end of this year. This figure is expected to grow at an annual rate of 23.88% and reach more than $2 billion by 2027.

The U.S. currently accounts for the highest revenue from NFTs and it is likely that the taxman wants his share of the money that this exciting new industry is expected to rake in.  

Until now, the IRS’s definition of a virtual currency was basically a digital token “that functions as a unit of account, a store of value, or a medium of exchange.”

About the author

Anjali Kochhar covers cryptocurrency stories in India as well as globally. Having been in the field of media and journalism for over three years now, she has developed a sharp news sense and works hard to present information that goes beyond the obvious. She is an avid reader and loves writing on a wide range of subjects.

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