NFTs can be treated as works of art and collectibles like coins, alcohol, and antiques. Similar amendments prepare Internal Revenue Service (IRS) and US Treasury in new guidelines.
The rules will prohibit the addition of non-fungible tokens to a portfolio of Individual Retirement Accounts (IRAs).
Classifying NFTs as collectibles can affect how they are taxed when traded or sold on the secondary market.
Depending on the income of a US resident, capital gains tax ranges from 10% to 37%, but for works of art this figure is limited to 28%.
“Such a classification means that in an NFT with a picture for tax purposes, the object of collection will be a JPEG file, and not the token itself,” explained Decrypt Director of Regulatory Affairs Blockchain Intelligence Group Timothy Cradle.
The departments have requested comments on the proposed changes by June 19. Among the questions are the following content: “What factors should be considered to determine whether a digital file is „a work of art”?
“Praise be to them [IRS и Минфину] for asking for public opinion to make informed decisions about regulation instead of enforcement!”, – responded the founder of Magic Eden under the pseudonym Sh0edog.
Dept. of Treasury & the IRS just asked for public comment on whether NFTs should be classified as “collectibles” for tax purposes. Kudos to them for soliciting public comments to make informed reg decisions rather than regulating by enforcement! They propose an interesting…
— Shoedog (@sh0edog) March 21, 2023
Until the new principles are approved, the Tax Service will be guided by “through analysis” regarding NFTs. That is, look at the basic subject, the ownership that it represents, is explained in the document.
For example, a token representing a gem would be treated as a collectible. NFT in the form of the right to develop a piece of land in the metaverse is not recognized as such.
Cradle admitted that marketplaces of non-fungible tokens are not recognized as “value transfer providers” under the new rules, which is appropriate for crypto exchanges.
The expert noted that the leadership is able to influence how NFT platforms fall under the AML/KYC-rules. In the future, the situation may change with the appearance of appropriate recommendations. FinCENhe added.
“This will limit the likelihood that marketplaces will have to comply with certain laws and/or have MTL. Conversely, it will increase the risk of using NFT for money laundering, since it is very easy to convert crypto-currency into such assets,” concluded the expert.
Recall that US President Joe Biden in the draft budget for fiscal year 2024 proposed a number of measures to increase revenue from the industry by $24 billion.
In September 2022, it became known that the IRS would send out invitations to appear before the department to users who do not report and do not pay tax on crypto transactions. This will be possible after the appropriate permission of the court.
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