IRS tax authority to clarify NFT tax treatment

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IRS tax authority to clarify NFT tax treatment

According to a document published by the U.S. Internal Revenue Service, non-fungible NFTs can be taxed on par with other collectibles, such as fine wine or works of art.

The move could affect taxpayers who have included NFTs in their retirement plans.

The IRS's efforts to clarify the tax treatment of digital assets is what the proposed guidance is meant to fill a void that has caused confusion among taxpayers.

According to a report by Coindesk, both the IRS and the Treasury Department are asking for feedback on the guidance on the tax treatment of NFTs.

The guidance suggests that NFTs may be treated less favorably under capital gains tax rules.

There may be implications for individual retirement accounts that acquire these assets, according to the statement.

The tax authority is treating NFTs like their underlying assets, such as artwork or gemstones.

The IRS expanded its instructions for tax form filers to include NFTs and cryptocurrencies in October.

The IRS and the Treasury Department are aware that there may be uncertainty about the tax treatment of a NFT acquired in the course of conducting a trade or business, as stated by the IRS in the document. The new guidance is intended to provide clarity for taxpayers and to ensure the tax treatment of NFTs across different taxpayers.

The IRS is currently accepting comments on the proposal until June 19, 2023.

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