NFT Tax Services | Expert NFT Tax CPA

How the IRS Taxes NFTs

The IRS treats NFTs as property, similar to other digital assets. However, NFTs introduce unique considerations that set them apart from fungible cryptocurrencies like Bitcoin or Ethereum.

Capital Gains on Sales

When you sell an NFT for more than your cost basis, you realize a capital gain. Short-term gains (assets held less than one year) are taxed at ordinary income rates up to 37%. Long-term gains (held over one year) receive preferential rates of 0%, 15%, or 20% depending on your income.

 

The Collectibles Question

In March 2023, the IRS issued Notice 2023-27 signaling that certain NFTs may be classified as "collectibles" under IRC §408(m). If an NFT's underlying asset qualifies as a collectible—such as art, gems, antiques, or similar items—long-term capital gains may be taxed at a maximum rate of 28% instead of the standard 20% maximum. We analyze each NFT to determine the appropriate tax treatment.

 

Creator Income and Royalties

If you create and sell NFTs, your initial sale proceeds are typically treated as ordinary income (or self-employment income if you're operating as a business). Many NFT platforms also distribute ongoing royalties from secondary market sales. These royalties constitute taxable income in the year received and must be reported regardless of amount.

 

Using Crypto to Purchase NFTs

When you use ETH, SOL, or other cryptocurrency to buy an NFT, you're making two transactions for tax purposes: a disposal of the crypto (triggering potential capital gain or loss) and an acquisition of the NFT. We track both legs of these transactions to ensure accurate basis calculations.

 

Our NFT Tax Services

Comprehensive Transaction Reconciliation

NFT activity often spans multiple wallets, marketplaces, and blockchains. We aggregate your data from OpenSea, Blur, Magic Eden, Foundation, SuperRare, and other platforms to build a complete transaction history. Our process captures minting costs, gas fees, purchase prices, and sale proceeds across all your wallets.

 

Cost Basis Tracking

Accurate cost basis is essential for calculating gains and losses. We track your acquisition costs including purchase price, minting fees, and gas expenses. For NFTs received through airdrops, we establish basis at fair market value at receipt.

 

Collectibles Analysis

For each NFT sale, we evaluate whether the underlying asset triggers collectible treatment under IRS Notice 2023-27. This determination affects your tax rate on long-term gains and requires careful analysis of the NFT's nature and characteristics.

 

Creator and Royalty Reporting

NFT creators face unique reporting requirements. We help you properly categorize initial sale income, track ongoing royalty payments, and identify deductible business expenses such as platform fees, marketing costs, and professional services. If you're operating as a business, we can advise on entity structure options.

 

Form 8949 and Schedule D Preparation

All capital gains and losses from NFT disposals must be reported on Form 8949 and summarized on Schedule D. We prepare these forms accurately, applying the appropriate holding periods and tax rates, and ensuring reconciliation with any 1099 forms issued by platforms.

 

Common NFT Tax Scenarios We Handle

High-Volume Traders

Active NFT traders may have hundreds or thousands of transactions annually. We use specialized software combined with manual review to ensure every flip, swap, and sale is captured and properly classified.

 

Digital Artists and Creators

From single-edition drops to generative collections, we help creators understand their tax obligations and maximize legitimate deductions. We can also advise on whether creator activity rises to the level of a trade or business.

 

Long-Term Collectors

If you're holding blue-chip NFTs as investments, we help with basis tracking, holding period optimization, and strategic planning for future sales.

 

Gaming and Metaverse Assets

In-game items, virtual real estate, and play-to-earn rewards all have tax implications. We help gamers and metaverse participants understand when earning or selling these assets triggers taxable events.

 

NFT Staking and Yield

Some platforms allow NFT staking to earn rewards. These rewards typically constitute ordinary income at receipt, with subsequent disposals subject to capital gains treatment.

 

New Jersey NFT Investors: State-Specific Considerations

If you're a New Jersey resident, your NFT gains face additional state tax considerations:

• New Jersey taxes capital gains as ordinary income, with rates up to 10.75%

• NJ does not allow capital losses to offset ordinary income (unlike federal rules)

• NJ does not permit capital loss carryforwards to future years

• Losses can only offset gains within the same tax year

 

These limitations make strategic planning especially important for NJ-based NFT investors. A federal tax-loss harvesting strategy may provide significantly less benefit on your state return, and we help you understand these differences.

 

Why Work With a Specialized NFT Tax CPA?

NFT taxation combines the complexity of cryptocurrency accounting with unique asset classification questions. Many general accountants lack experience with:

• Multi-chain transaction aggregation across Ethereum, Solana, Polygon, and other networks

• The technical distinction between fungible and non-fungible tokens

• IRS Notice 2023-27 collectibles analysis

• Royalty income tracking across multiple platforms

• Gas fee treatment and basis adjustments

 

At Monaco CPA, we understand both the technology and the tax law. Gregory Monaco, CPA & MBA, has deep experience with digital asset taxation and stays current with IRS guidance affecting NFTs.

 

Getting Started

Ready to get your NFT taxes handled by a specialist? Here's how we work:

1. Free Consultation: We discuss your NFT activity, platforms used, and any concerns about prior-year reporting

2. Data Collection: You provide wallet addresses, exchange exports, and platform transaction histories

3. Reconciliation: We aggregate and reconcile all transactions, identifying any missing data or discrepancies

4. Review and Preparation: We prepare your tax forms and review the results with you, explaining your tax liability and any planning opportunities

5. Filing and Support: We file your returns and remain available to answer questions or respond to any IRS inquiries

 

FAQs: NFT Taxes

Do I owe taxes if I just bought an NFT and haven't sold it?

Simply purchasing and holding an NFT does not trigger a taxable event. However, if you used cryptocurrency to make the purchase, that crypto disposal may trigger capital gains or losses.

 

Are NFT gas fees tax deductible?

Gas fees paid to mint or purchase an NFT typically add to your cost basis, reducing your gain (or increasing your loss) when you eventually sell. Gas fees for failed transactions may be deductible in some circumstances.

 

I received an NFT airdrop. Is that taxable?

Yes. NFTs received through airdrops are taxable as ordinary income at fair market value when you receive them. This value becomes your cost basis for future sales.

 

What if my NFT is now worthless?

If an NFT has become worthless, you may be able to claim a capital loss. The IRS generally requires evidence of worthlessness, such as a market with no buyers or a delisted collection. We can help evaluate whether a worthlessness deduction is appropriate.

 

Do I need to report small NFT sales?

Yes. All NFT sales must be reported regardless of the amount. There is no de minimis exception for small transactions.

 

Schedule Your Free Consultation

Don't let NFT tax complexity lead to costly mistakes or missed opportunities. Contact Monaco CPA today to discuss your NFT portfolio and tax situation.

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Phone: (862) 320-9554

Email: Greg@MonacoCPA.CPA

Website: www.MonacoCPA.cpa

 

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