The U.S. Internal Revenue Service (IRS) has made a move this week to clarify at least one question for crypto investors: how taxpayers account for non-fungible tokens (NFTs).
The tax division of the Treasury Department released an updated draft for its 2022 instructions for form 1040 filers that swaps the old category for “virtual currency” with broader new language on “digital assets,” including an explicit recognition of NFTs.
“Digital assets are any digital representations of value that are recorded on a cryptographically secured distributed ledger or any similar technology,” according to the draft instructions. “For example, digital assets include non-fungible tokens (NFTs) and virtual currencies, such as cryptocurrencies and stablecoins.”
The previous year’s “virtual currency” section of the U.S. tax-filing instructions was a narrower definition of a digital token “that functions as a unit of account, a store of value, or a medium of exchange.” The final tax instructions haven’t yet been released, so the crypto section could still be tweaked before it’s official.
Crypto investors will have to calculate and report taxable income “if you disposed of any digital asset in 2022, that you held as a capital asset, through a sale, exchange, gift, or transfer,” according to the latest document.
DISCLOSURE
Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.