NFT (Non-Fungible Token)?

An NFT (Non-Fungible Token) is a digital item you can buy, sell, or own online, like art, music, or collectibles.

For tax purposes, the IRS treats NFTs as property, similar to stocks or cryptocurrency. That means when you sell or exchange an NFT, it can create a taxable event.

📊 When Do NFTs Affect Your Taxes?

You may need to report NFTs on your tax return if you:

• Sold an NFT
• Traded one NFT for another
• Used cryptocurrency (like Ethereum) to buy an NFT
• Received an NFT as payment or through an airdrop
• Earned income from creating or selling NFTs

💰How NFTs Are Taxed

It depends on how you’re using them.

👤If You’re Buying and Selling NFTs

This is treated like investing.

• If you sell for more than you paid → you have a gain
• If you sell for less → you have a loss

This is called a capital gain or loss.

Example:

• You buy an NFT for $1,000
• You sell it for $2,500

You would report a $1,500 gain

🎨 If You Created the NFT

If you made and sold the NFT (for example, digital artwork):

• The money you receive is income, not a capital gain
• It may also be subject to self-employment tax

⚠️ Important: Crypto Used to Buy NFTs

If you used cryptocurrency to purchase an NFT, the IRS treats that as selling the crypto.

This means:

• You may have a separate gain or loss on the crypto itself

💻 Where to Report NFTs on Your Tax Return

✅ Selling or Trading NFTs (Most Taxpayers)

You’ll report this as a capital gain or loss.

In TaxSlayer:

1. Go to Income
2. Select Investments
3. Choose Stocks, Mutual Funds, Cryptocurrency, Collectibles, etc.
4. Click Enter sales one by one

What to enter:

• Description: NFT (or name of the NFT)
• Date acquired and date sold
• Sales price (what you received)
• Cost/basis (what you paid, including fees)

If You Used Crypto to Buy the NFT

You’ll need to report that crypto transaction separately.

In TaxSlayer:

Use the same section:

• Income → Investments → Stocks, Mutual Funds, Cryptocurrency, Collectibles, etc.→ Enter sales one by one

Enter:

• Description (example): “Ethereum used to purchase NFT”
• Cost (what you originally paid for the crypto)
• Value at time of use (what it was worth when you bought the NFT)

If You Received NFT Income

This includes:

• Selling NFTs you created
• Getting paid in NFTs
• NFT airdrops

Option 1: If it’s part of a business

Report on Schedule C

In TaxSlayer:

• Go to Income
• Select Profit or Loss from Business (Schedule C)

Option 2: If it’s not a business

In TaxSlayer:

1. Go to Income
2. Select Other Income
3. Enter:
   • Description: “NFT income”
   • Amount: value when received

🧠Digital Asset Question