- The U.S. Internal Revenue Service has released a revised definition of “digital assets” that will allow the IRS to tax any kind of digital asset in the future, including NFTs.
- If approved, US crypto users will now be required to declare the NFTs they hold just as they declare their cryptocurrencies and stablecoins.
- The United States Internal Revenue Service (IRS) announced how taxpayers should declare their non-fungible tokens (NFTs).
The United States Internal Revenue Service (IRS) has published an updated draft of the fiscal year 2022 guide where the previous category of “virtual currency” has been changed by a broader language on “digital assets”, where NFTs are explicitly recognized.
In the previous year’s U.S. tax return instructions, the “virtual currency” section provided a narrower definition of a digital token, defining it as “that functions as a unit of account, a store of value, or a medium of exchange. However, this left out certain elements of the crypto industry.
Nevertheless The bill recently published by the IRS presents a section called “Digital Assets” which describes how and when a taxpayer must declare the use of cryptocurrencies, stablecoins and NFTs.
According to the new IRS definition, a digital asset is any digital representation of value in a “cryptographically protected distributed ledger or any similar technology.” This is essential because It will allow the IRS to tax any kind of digital asset in the future.
This implies that the IRS has decided not to classify NFTs as “collectible items”, lwhich are taxed at a different rate than stocks or bonds.
NFTs must be declared and pay income tax
Any taxpayer who has “disposed of any digital asset in 2022” whether through a sale, exchange, donation or transfer must
In many circumstances, a person must indicate “yes” to the Digital Assets question on Form 1040 or 1040-SR. For example, if you received digital assets as payment for a property or service provided or as a result of a reward.
Since non-fungible tokens are a digital representation of value on a distributed ledger, anyone who has received an NFT as compensation for services or has made the asset available for sale will need to report it as income.
Likewise, the IRS explained that taxpayers will not be required to mark “Yes” on their forms if they have transferred digital assets from their own wallet to another wallet that they also own or if they have acquired digital assets using some fiduciary currency. through electronic platforms. Every taxpayer must mark “Yes” or “No” as the case may be.
As digital assets gain relevance in the world, tax authorities begin to implement greater measures with the aim of taxing this ecosystem.
In fact, Portugal recently introduced a 28% capital gains tax on earned cryptocurrencies. At the time this country
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