Guide to NFT Taxes

How Are NFTs Taxed?

NFTs may be taxed in one of two ways:

• As property: NFTs are digital assets that are generally given the same tax treatment as cryptocurrency and stocks. That means buying, selling or trading NFTs could result in capital gains tax.
• As a collectible: It's possible that the IRS may treat an NFT as a collectible—similar to antiques, memorabilia or fine art. These could be taxed at a rate as high as 28%, which exceeds the 20% max for long-term capital gains.

No matter which category an NFT falls under, you'll need to report gains and losses on your annual tax return. Your tax rate is determined by how long you held the asset, along with your taxable income and filing status. In some cases, you might be able to deduct a capital loss to reduce your taxable income.

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NFT Tax Rates

Below is a closer look at NFT tax rates based on different holding periods, income levels and tax filing statuses. Long-term capital gain tax applies to assets held longer than one year.

Source: IRS

If you sell an NFT and have owned it for less than a year, you can expect a higher short-term capital gain rate—assuming the NFT is being treated as property and not a collectible. Short-term capital gains are taxed at your top marginal tax rate, also known as your tax bracket.

Source: IRS

Tax Rates on Collectibles

If the NFT is considered a collectible, you'll be taxed at whichever rate is lower—your ordinary tax rate or the 28% tax rate on collectibles.

Taxes When Buying NFTs

NFTs can be purchased in a variety of ways. Ethereum is a leading platform for NFT sales, while OpenSea is perhaps the largest NFT marketplace. Content creators generate and store original pieces of digital art on the Ethereum blockchain. Investors then buy and sell them in a marketplace. Secure technology keeps track of transaction histories and rights of ownership.

Buying With Dollars

Cryptocurrency is the standard form of payment, but some marketplaces may allow you to pay in cash. The good news is that purchasing an NFT with traditional currency won't trigger a tax liability since it doesn't generate an investment gain. But if you turn around and sell that NFT for a profit later on, you can expect to be taxed.

Buying With Crypto

If you purchase an NFT with crypto, you're essentially using one form of property to buy another. You may owe taxes if the cryptocurrency you're using to make the purchase has increased in value since you acquired it. The amount you owe will depend on your income, filing status and how long you held the asset.

Also be aware that most NFTs can only be purchased in their native cryptocurrency. For example, Ether must be used to buy NFTs that are tied to the Ethereum blockchain.

Example: You spend $2,000 to purchase 1 ETH (Ether). Two years later, you use that ETH to buy an NFT. At this point, the ETH is worth $2,500. This second transaction is treated as if you sold that single ETH for $2,500. That translates to a long-term capital gain of $500.

Taxes When Selling NFTs

The way you're taxed on NFT sales depends on whether you're an investor or an NFT creator.

Investors

Once you purchase an NFT, it becomes your property—and you can sell it to the highest bidder if you choose. You can expect to pay capital gains tax if you turn a profit. If you sell it for a loss, you can deduct up to $3,000 from your taxable income (or $1,500 if you're married and filing your taxes separately).

NFT Creators

If you're a content creator or digital artist who sells original NFTs, you'll be expected to report the money as income on your tax return. You may also be on the hook for paying self-employment taxes and quarterly estimated taxes. The upside is that self-employed people can also deduct qualified business expenses to reduce their taxable income.

Example: Say ETH is worth $2,000 and you purchase an NFT for 1 ETH. Six months later, you sell that NFT for 1 ETH. At the time of the sale, a single ETH was valued at $3,000. In the eyes of the IRS, you realized a short-term capital gain of $1,000.

Are NFT Gifts Taxable?

If you receive an NFT as a gift, you will only be taxed if you choose to sell it later for a profit. Gifting an NFT to someone else could technically result in taxes, but it's unlikely. U.S. taxpayers enjoy an annual gift tax exclusion that allows you to transfer up to $19,000 per recipient in 2026, tax-free. The lifetime exclusion amount is $15 million per individual ($30 million for married couples).

If the total value of your gifts to one person, including NFTs, exceeds $19,000 in 2026, you'll have to report the difference on your tax return.

How to Report NFTs on Taxes

The IRS has specific guidelines for taxing digital assets. Follow these steps if you sold an NFT for cash or cryptocurrency:

1. Calculate the capital gain or loss.
2. Determine your basis (or how much the property originally cost).
3. Use Form 8949 to report the transaction.
4. Include this information on Schedule D (Form 1040).

How to Limit Taxes on NFTs

While it may not be possible to avoid taxes entirely, you might be able to minimize the impact. Here's how:

• Hold your NFTs for at least one year. Long-term capital gains rates are more favorable than short-term rates. Depending on your income and filing status, you might pay 0%, 15% or 20%. Short-term tax rates, on the other hand, can be as high as 37%.
• Pay in fiat currency if possible. The term "fiat currency" refers to traditional, government-backed currency like U.S. dollars. Paying for NFTs with cryptocurrency triggers a taxable event—but not if you pay with cash.
• Plan ahead if you're selling NFTs as a content creator. Self-employed folks are expected to report their income on their tax return and pay quarterly estimated taxes throughout the year. Otherwise, you may be in for an unwelcome surprise come tax season (or if you're audited by the IRS).

Frequently Asked Questions

The Bottom Line

For the most part, NFTs and other digital assets like cryptocurrency are seen as property in the eyes of the IRS. That means NFT gains receive the same tax treatment as capital gains on stocks or real estate. But things can get tricky if an NFT is considered a collectible. NFT taxes can be complicated—and the rules aren't always clear. Working with a tax professional can help ensure that you're following best practices.