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NFT Taxes: How the IRS Treats Them

NFTs are taxed as property, and some count as collectibles taxed up to 28%. How buying, selling, and creating NFTs is taxed, with IRS Notice 2023-27.

Updated July 2026 ยท Educational only, not tax or financial advice

NFTs are taxed as property, and NFTs the IRS treats as collectibles face a long-term rate up to 28% instead of the usual 0/15/20%

Every NFT trade is a taxable event, even swapping one NFT for another. Creators owe ordinary income on sales. The collectibles rule can raise your rate by 8 points.

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Why it matters

Every NFT trade is a taxable event, even swapping one NFT for another. Creators owe ordinary income on sales. The collectibles rule can raise your rate by 8 points.

The direct answer

NFTs are taxed as property by the IRS, and some NFTs are taxed as collectibles at a higher rate. This is educational only, not tax or financial advice โ€” consult a tax professional. Because crypto and NFTs are property under Notice 2014-21, every sale, trade, or swap of an NFT is a taxable event.

The key twist is IRS Notice 2023-27. The IRS said it will treat certain NFTs as "collectibles." A collectible held over one year is taxed at a long-term rate up to 28%, not the usual 0%, 15%, or 20%.

Whether an NFT is a collectible depends on what it points to. The IRS uses a "look-through" test. An NFT tied to a gem or art is likely a collectible. An NFT for virtual land is likely not.

Creators face a different rule. Selling an NFT you made is usually ordinary income, sometimes self-employment income. Below we break down buyers, sellers, and creators, with the IRS sources for each.

How it works

NFT taxes work the same way as other crypto taxes, because the IRS treats both as property. When you sell or trade an NFT, you have a capital gain or loss equal to the proceeds minus your cost basis. The holding period sets whether the gain is short-term or long-term.

Buying an NFT with crypto is itself a taxable event. You are disposing of the crypto you spend. If that Ether rose since you bought it, you owe tax on that gain, separate from anything the NFT does later.

The collectibles rule comes from Notice 2023-27. The IRS applies a look-through analysis: it examines the asset the NFT certifies. If that underlying asset is a collectible under IRC ยง408(m) โ€” like art, gems, or coins โ€” the NFT is a collectible too. A long-term collectible gain is taxed up to 28%.

Not every NFT is a collectible. The IRS example says an NFT giving a right to use virtual land is generally not a collectible. Those follow the normal 0/15/20% long-term rates. The classification changes your rate, so it matters.

Creators are taxed differently from investors. If you mint and sell NFTs, the sale proceeds are ordinary income. If you do it as a trade or business, you may also owe self-employment tax. Royalties you earn on later resales are ordinary income when received.

Step by step

  1. 1Record the cost basis of every NFT โ€” for a buyer, that is the crypto value spent plus gas fees at the time of purchase.
  2. 2Treat buying an NFT with crypto as two events: a disposal of the crypto (possible gain or loss) and the acquisition of the NFT.
  3. 3When you sell or swap an NFT, calculate the gain or loss as proceeds minus cost basis, using the fair market value in US dollars.
  4. 4Check the holding period โ€” over one year is long-term, and if the NFT is a collectible under Notice 2023-27 the long-term rate can reach 28%.
  5. 5Apply the look-through test: identify the asset the NFT certifies and decide whether that underlying asset is a collectible.
  6. 6If you created the NFT, report sale proceeds and resale royalties as ordinary income, and consider self-employment tax if it is a business.
  7. 7Report each disposal on Form 8949 and Schedule D, and keep wallet and marketplace records to support every figure.

When it helps

  • NFT losses are capital losses that offset capital gains and up to $3,000 of ordinary income per year, the same as other crypto property.
  • Long-term NFTs that are not collectibles still qualify for the lower 0/15/20% capital-gains rates if held over one year.
  • The look-through test means many utility NFTs, like virtual-land access, avoid the 28% collectibles rate under Notice 2023-27.
  • Because no wash sale rule applies to crypto property in 2026, NFT losses can be harvested without a 30-day waiting period.

Watch-outs

  • Buying an NFT with appreciated crypto triggers tax on the crypto gain, a step many buyers overlook until they file.
  • NFTs classified as collectibles are taxed at a long-term rate up to 28%, higher than the 20% top rate on ordinary crypto.
  • The collectibles look-through test from Notice 2023-27 is guidance, not final regulation, so classification can be uncertain.
  • Creators owe ordinary income โ€” and possibly self-employment tax โ€” on NFT sales, which is often a higher rate than capital gains.
  • Gas fees, wash trading, and thin markets make cost basis and fair market value hard to document, raising audit risk.

Common questions

How are NFTs taxed by the IRS?

NFTs are taxed as property, so selling or trading an NFT creates a capital gain or loss equal to proceeds minus cost basis. This is educational only, not tax advice. If the NFT is a collectible under IRS Notice 2023-27, a long-term gain can be taxed up to 28% instead of the usual 0/15/20%. Creators generally owe ordinary income on NFT sales.

Do I owe tax when I buy an NFT?

Yes, if you buy an NFT with cryptocurrency, you are disposing of that crypto, which is a taxable event. If the crypto you spent gained value since you acquired it, you owe capital gains tax on that increase. This is separate from any tax when you later sell the NFT itself. Buying an NFT with US dollars is not itself a disposal.

What is the 28% NFT collectibles tax?

Under IRS Notice 2023-27, an NFT the IRS treats as a collectible is taxed at a maximum long-term capital gains rate of 28%, which is 8 points above the normal 20% top rate. The IRS uses a look-through test: if the asset the NFT certifies (like art or gems) is a collectible, the NFT is too. Utility NFTs like virtual land generally are not collectibles.

How are NFT creators taxed?

NFT creators generally owe ordinary income tax on the proceeds from selling NFTs they made, not capital gains. If minting and selling NFTs is a trade or business, self-employment tax may also apply. Royalties earned on later resales are ordinary income when received. Consult a tax professional to determine whether your activity is a hobby or a business.

Can I deduct losses on NFTs?

Yes, NFT losses are capital losses because NFTs are property. They offset your capital gains dollar-for-dollar, and up to $3,000 of remaining loss can offset ordinary income each year, with the rest carried forward. Because no wash sale rule applies to crypto in 2026, you can harvest NFT losses without a 30-day waiting period.

Do I report NFTs on Form 8949?

Yes, you report each NFT sale or trade on IRS Form 8949, then summarize the totals on Schedule D. List short-term (held one year or less) and long-term (held over one year) disposals separately. Collectible NFTs feed into the 28% rate calculation on the Schedule D worksheet. Keep marketplace and wallet records to support each entry.

Sources

Related guides

Wash sale rule (crypto) โ†’DeFi taxes โ†’Form 8949 guide โ†’Crypto tax loss harvesting โ†’Free crypto tax tools โ†’Crypto tax by country โ†’How to invest in crypto โ†’

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