Following the announcement, a section of the crypto community on Twitter has praised the IRS and Treasury Department for taking such a comprehensive approach rather than regulating through enforcement.
The Internal Revenue Service (IRS) may consider allowing the addition nft For Individual Retirement Accounts (IRAs). It comes after both the IRS and the US Treasury Department revealed their plans To issue guidance that will see non-fungible tokens treated similarly to physical art and other collectibles. This means that those in the United States who plan to add JPEG to their retirement accounts may need to reconsider.
For now, the IRS and Treasury Department are seeking public opinion on the proposed changes. The questions asked will try to determine two key things. Firstly, to determine how a digital file can qualify as a ‘work of art’. Also, to understand how burdensome its observational analysis can be.
According to the agencies, they will be accepting comments from the public till June 19.
How Will the IRS Tax NFTs?
Another implication of the new IRS announcement will be tax implications. By classifying NFTs as collectibles, the IRS can tax NFTs when they are exchanged or sold in secondary markets. However, short term capital gains tax – Those who are subject to NFTs will depend on the income level of the individual. That is, it can be from 10% to 37%. For collectibles, however, the capital gain is capped at 28%.
Meanwhile, at the time of forming its new guidance on NFTs, the agency says it will employ a “look-through analysis” to determine whether NFTs should be classified as collectibles. This means that underlying factors and what the NFT represents will play a major role in this decision.
Timothy Cradle, director of regulatory affairs at Blockchain Intelligence Group, attempts to explain the move by the IRS. According to Cradle, the IRS is looking to classify NFTs as digital receipts which would not be too far from what they are. He said in part:
“This means that in a scenario where one has a JPEG NFT, then the JPEG is collectable for taxation purposes and not the NFT itself.”
Following the announcement, a section of the crypto community on Twitter has praised the IRS and Treasury Department for taking such a comprehensive approach rather than regulating through enforcement.
Mayowa is a crypto enthusiast/writer whose conversational character is quite evident in his writing style. He firmly believes in the potential of digital assets and takes every opportunity to reiterate this. He is also an avid reader, a researcher, an astute speaker and a budding entrepreneur. Although away from crypto, Mayowa’s distractions include discussing soccer or world politics.
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