NFT sale taxes — including the 28% collectible rate and the crypto-payment wrinkle
| Event | Amount | Treatment |
|---|
NFT taxes are crypto taxes with two extra traps. First: art and collectible NFTs held over a year face the 28% collectibles rate instead of the friendly 15/20% — the IRS looks through the token to what it represents. Second, and near-universally missed: buying an NFT with appreciated ETH is itself a taxable ETH sale — one purchase, two tax events. Creators live under different rules entirely (business income plus SE tax, royalties included). This estimator handles all three roles honestly.
| You are… | Your NFT taxes |
|---|---|
| Collector / investor | Capital gains: short-term at your bracket; long-term at 15/20% — or 28% if it's a collectible-type NFT |
| Creator | Primary sales and royalties are ordinary business income (Schedule C) + SE tax; gas and platform fees deduct |
| Flipper at volume | Dealer treatment: inventory income, ordinary rates, SE tax — frequency and intent decide |
You bought 2 ETH at $1,500 each ($3,000). Later, ETH at $4,000 each, you spend the 2 ETH on an $8,000 NFT. Tax event #1 happens at purchase: you disposed of ETH with a $5,000 gain. Your NFT's basis is $8,000. Sell the NFT later for $12,000: event #2, a $4,000 NFT gain. Skipping event #1 is the most common NFT-tax error — the estimator's ETH-gain field exists precisely for it.
IRS guidance applies a look-through analysis: an NFT whose value is a digital artwork, trading card or collectible item inherits the 28% long-term collectible cap (below your ordinary bracket if you're under 28%, a haircut if you're a high earner banking on 20%). Utility NFTs — domain names, access passes, in-game functional items — plausibly avoid it. The line is genuinely unsettled; the estimator lets you price both cases, and big-money sales deserve professional advice.
Worthless or near-worthless NFTs: selling them (even for pennies on a burn marketplace) realizes a deductible capital loss — offsetting other gains plus $3,000/yr of income. Crypto's no-wash-sale latitude arguably extends here, though rebuying the identical NFT you just harvested invites scrutiny. Abandonment claims are murkier; a genuine sale is the clean path.
Congress taxes collectibles (art, cards, coins, wine) at up to 28% long-term, and the IRS looks through NFTs to what they represent. It only binds if your bracket exceeds 28%'s equivalent — at a 22% bracket, you pay 22%; the 28% is a cap, not a floor.
Spending crypto is disposing of it, exactly like spending stock would be. The ETH's appreciation since YOU bought it is taxed at purchase time; the NFT then starts fresh at its dollar-value basis. One transaction, two ledger entries.
Buyers: add acquisition gas to the NFT's basis. Sellers: selling gas reduces proceeds. Creators: business expense. Failed-transaction gas is the sad gray zone — investment costs with no clean deduction for collectors.
Yes — each secondary-sale royalty is income at receipt (creator), at the crypto's then-value, which becomes new basis. Active creators accrue hundreds of small income events; wallet-import tax software is the sanity path.
Realize the loss with an actual sale — burn marketplaces exist for exactly this — and it becomes a normal capital loss. Holding a worthless token deducts nothing; the disposal is what counts.
Increasingly — digital-asset broker reporting (1099-DA) reaches major platforms, and chain analysis fills gaps. Assume visibility; the 1040's digital-asset question is answered under penalty of perjury.
Yes — every figure computes locally in your browser; nothing connects to any wallet.
Count both events on crypto-funded purchases, respect the 28% question on art pieces, and treat creator royalties as the business income they are. NFT taxes aren't exotic — they're property rules applied carefully, which this estimator makes a two-minute habit.