NFT taxes follow the same federal rules as other digital assets: an investor who sells, swaps or spends an NFT reports a capital gain or loss, and a creator who mints and sells NFTs as a business reports ordinary income that is also subject to self-employment tax. The one rule unique to NFTs is the collectible test in IRS Notice 2023-27, which can push a long-term gain from the usual 15% or 20% rate up to a 28% maximum.
This guide covers NFT taxes as of October 2026, including a worked example of the collectible rate and the new Form 1099-DA rules. It is general information, so confirm the details with a tax professional.
The IRS lists non-fungible tokens by name in its definition of digital assets. Its digital assets page describes a digital asset as "any digital representation of value recorded on a cryptographically secured, distributed ledger" and includes "Non fungible tokens (NFTs)" among the examples. That places NFTs under the same property rules that apply to cryptocurrency, so the broader material in our guide to business cryptocurrency tax implications applies to NFTs as well.
Notice 2023-27 defines an NFT as "a unique digital identifier that is recorded using distributed ledger technology." The token usually points to something else, such as a digital image, an in-game item or a certificate of ownership for a physical object, and that associated item decides whether the collectible rate applies.
Most NFT taxes are triggered by a disposal of something you own. The common events are:
| Event | Taxable? | What gets reported |
|---|---|---|
| Buying an NFT with US dollars | No | Nothing yet; record the cost as your basis |
| Buying an NFT with cryptocurrency | Yes, on the crypto spent | Gain or loss on the crypto, measured against its basis |
| Selling an NFT for dollars or crypto | Yes | Capital gain or loss on the NFT |
| Swapping one NFT for another | Yes | Gain or loss on the NFT given up |
| Moving an NFT between your own wallets | No | Nothing, unless the gas fee is paid in crypto |
| Minting and selling your own NFT as a business | Yes | Ordinary business income |
| Royalties from secondary sales of your work | Yes | Ordinary income when received |
The IRS virtual currency FAQs state that a transfer between wallets or accounts that belong to you "is a non-taxable event," although the IRS digital assets page treats paying a transfer fee with digital assets as a reportable disposal. The crypto purchase row surprises many collectors. The same FAQs answer it directly: when you use crypto held as a capital asset to pay for something, you "have exchanged a capital asset" and "will have a capital gain or loss." Paying 2 ETH for an NFT is therefore a sale of 2 ETH, and the gain or loss depends on what you originally paid for that ETH. Our guide to calculating crypto cost basis covers how to find that figure across wallets and lots.
The NFT you receive takes a basis equal to the value of the crypto you gave up, plus fees. Gas fees and marketplace fees paid to acquire the NFT generally go into basis, and fees paid on the sale reduce your proceeds.
For an investor, the gain or loss is the amount realized minus your basis. The holding period then sets the rate:
For 2026, Rev. Proc. 2025-32 sets the 0% and 15% rate ceilings at $49,450 and $545,500 of taxable income for single filers, and $98,900 and $613,700 for married couples filing jointly. Gains above the 15% ceiling are taxed at 20%. High earners may also owe the 3.8% net investment income tax, which starts at $200,000 of modified adjusted gross income for single filers.
Each sale goes on Form 8949 with the totals carried to Schedule D. Our walkthrough of Schedule D and Form 8949 explains how the boxes and adjustment codes work.
Section 408(m)(2) of the tax code defines a collectible as any work of art, rug or antique, metal or gem, stamp or coin, alcoholic beverage, or other tangible personal property the Treasury specifies. Long-term gain on collectibles carries a higher ceiling: IRS Topic 409 states that "net capital gains from selling collectibles (such as coins or art) are taxed at a maximum 28% rate."
Notice 2023-27 explains how the IRS applies this to NFTs. Pending formal guidance, "the IRS intends to determine whether an NFT constitutes a section 408(m) collectible by analyzing whether the NFT's associated right or asset is a section 408(m) collectible." The IRS calls this the look-through analysis. The notice gives two examples:
The hardest category is digital art. The notice says the Treasury and the IRS "are considering the extent to which a digital file may constitute a 'work of art' under section 408(m)(2)(A)," and asked for public comments by June 19, 2023. As of October 2026, the IRS digital assets page still lists Notice 2023-27 as the guidance on "Treatment of certain NFT as collectibles," and no final rule on the look-through analysis has been published. Until that changes, an NFT tied to physical art, gems, precious metals, coins, wine or similar items should be treated as a collectible, while art-only NFTs remain an open question that a preparer should document case by case.
The collectible label also matters inside retirement accounts. Under the notice, "the acquisition by an individual retirement account (IRA) of a collectible shall be treated as a distribution," so a self-directed IRA that buys a collectible NFT can create a taxable distribution of the purchase price.
The table below compares two single filers in 2026, each selling an NFT held for more than a year at a $30,000 long-term gain. One NFT is a digital land parcel (non-collectible). The other certifies ownership of a vaulted gemstone (collectible). Figures use the 2026 brackets and capital gain thresholds from Rev. Proc. 2025-32, and the gain is the taxpayer's only capital gain.
| Filer A | Filer B | |
|---|---|---|
| Ordinary taxable income before the sale | $220,000 | $80,000 |
| Long-term NFT gain | $30,000 | $30,000 |
| Bracket the gain falls into | 32% | 22% and 24% |
| Tax if the NFT is not a collectible (15%) | $4,500 | $4,500 |
| Tax if the NFT is a collectible | $8,400 | $6,686 |
| Effective rate on the collectible gain | 28.00% | 22.29% |
| Extra tax from collectible status | $3,900 | $2,186 |
Filer A's gain sits in the 32% bracket, so the collectible gain is capped at 28%: $30,000 × 28% = $8,400. Filer B's gain is taxed at ordinary rates because those rates are below 28%: ($105,700 − $80,000) × 22% plus ($110,000 − $105,700) × 24% equals $5,654 + $1,032, or $6,686. In both cases the non-collectible gain stays in the 15% band, since total taxable income is below $545,500.
The rule works by bracket: collectible gain that falls in the 10% to 24% brackets is taxed at those ordinary rates, and any part that would fall in the 32% bracket or higher is capped at 28%. If Filer A's modified adjusted gross income exceeds $200,000, the 3.8% net investment income tax applies equally to both kinds of gain, so the gap is unchanged.
Creators sit outside the capital gains system for their own work. Section 1221(a)(3) excludes from capital assets "a copyright, a literary, musical, or artistic composition" held by "a taxpayer whose personal efforts created such property." An artist who mints and sells their own NFTs therefore reports ordinary income, even on a single sale. Resale royalties are generally ordinary income as well: IRS Publication 525 states that "royalties from copyrights; patents; and oil, gas, and mineral properties are taxable as ordinary income," and directs self-employed artists to report that income on Schedule C.
When minting is a regular activity carried on for profit, the income belongs on Schedule C. The IRS digital assets page tells contractors paid in digital assets to "report the digital asset income on" Schedule C, and says digital assets sold to customers in a business are reported there as well. Ordinary business costs such as gas and platform fees reduce the profit.
Schedule C profit also brings self-employment tax. The IRS self-employment tax page states that "the self-employment tax rate is 15.3%," made up of 12.4% for Social Security and 2.9% for Medicare, and that Schedule SE is required once net earnings from self-employment reach $400. The employer-equivalent portion of the tax is deductible in figuring adjusted gross income. Creators who are paid in crypto and want a rough savings target can use our guide on how much to set aside for taxes on 1099 income.
If the minting is occasional and not run like a business, the hobby loss rules under Section 183 can limit deductions, so the facts about profit motive matter. Creators who also stake tokens or earn validator rewards have a separate income question, which our article on crypto staking taxes covers.
Brokers began reporting digital asset sales on Form 1099-DA for transactions effected on or after January 1, 2025, and basis reporting applies to covered assets acquired after 2025. Our separate guide to Form 1099-DA explains the boxes in detail.
NFTs get an optional reporting method under the final broker regulations (T.D. 10000). According to the Form 1099-DA instructions, a digital asset is a specified NFT if it is "indivisible, unique," and does not give the holder an interest in certain excluded property. A broker using the optional method "may report all of a customer's specified NFT transactions together on a single Form 1099-DA," and "is not required to report sales of specified NFTs if the customer's aggregate gross proceeds" do not exceed $600 for the year, after reducing for allocable transaction costs. When a broker reports both first-sale proceeds and resale proceeds, it files two forms, with first-sale proceeds in box 11c.
A collector with $550 of NFT sales on a custodial marketplace may therefore receive no form, and trades through self-custody wallets may never be reported by a broker. The reporting duty stays with the taxpayer. The 1099-DA also shows proceeds only, so it says nothing about whether the NFT is a collectible. That classification is the preparer's call.
Form 1040 asks every filer whether, at any time during the tax year, they "(a) receive (as a reward, award or payment for property or services); or (b) sell, exchange, or otherwise dispose of a digital asset (or a financial interest in a digital asset)." Anyone who sold, swapped, minted and sold, or paid for an NFT with crypto in the year answers yes. Under the IRS virtual currency FAQs, a filer whose only activity was buying digital assets with US dollars checks the "no" box.
An NFT that drops in value can be sold to realize a capital loss that offsets other gains, with up to $3,000 of net capital loss ($1,500 if married filing separately) deductible against other income each year and the rest carried forward. Before selling and buying back a similar NFT or token, read our explanation of the wash sale rule, which covers how the rule treats digital assets as of 2026.
Someone who receives an NFT as a bona fide gift has no income until they sell or otherwise dispose of it, and the IRS virtual currency FAQs say the recipient's basis for measuring a gain equals the donor's basis plus any gift tax the donor paid. A gift above the annual exclusion may require a gift tax return; our guide on who must file Form 709 sets out when.
Good NFT records include the wallet address, transaction hash, date, the crypto paid and its dollar value, gas and marketplace fees, the associated asset (and whether it is a collectible), and the sale details. Businesses that hold NFTs on the balance sheet face separate financial reporting questions, which our article on cryptocurrency accounting for digital assets addresses.
Do I owe tax when I buy an NFT with crypto? Yes. Paying with crypto is treated as disposing of that crypto, so you report a gain or loss equal to the crypto's value at the time of purchase minus your basis in it. Buying with US dollars is not a taxable event.
Is every NFT a collectible? No. Under Notice 2023-27, the IRS looks through the NFT to its associated right or asset. An NFT tied to a gem or a physical artwork is a collectible, and a virtual land right generally is not. Whether a purely digital artwork counts is still unresolved as of October 2026.
Will I get a Form 1099-DA for my NFT sales? Possibly. Brokers that use the optional method for specified NFTs do not have to issue a form when your aggregate gross proceeds for the year are $600 or less, and sales through self-custody wallets may not be reported at all. You must report every sale either way.
Do NFT creators pay self-employment tax? Creators who mint and sell NFTs as a business report the income on Schedule C and owe self-employment tax, at a 15.3% rate, once net earnings from self-employment reach $400. Secondary-sale royalties are generally ordinary income too.
Madras Accountancy supports US CPA firms with tax preparation and bookkeeping, including reconciling digital asset activity across wallets and marketplaces, building basis records, separating creator income for Schedule C, and preparing Form 8949 and Schedule D detail for client returns. If your firm has clients with NFT or crypto activity this season, contact our team to discuss the work.
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