NFTs might feel like internet magic, but to the IRS, they're very real property — and potentially taxed at rates higher than Bitcoin or stocks.
Whether you're minting, flipping, collecting, or earning royalties, here's everything you need to know about NFT taxes in 2025.
The Big Picture: How the IRS Views NFTs
The IRS treats NFTs as property — similar to crypto, stocks, or real estate.
But here's the twist: Some NFTs may be classified as "collectibles" and taxed at a higher rate of up to 28% instead of the standard 20% long-term capital gains rate.
This makes NFT taxation more complex than regular crypto.
The Collectible Question: 20% vs. 28%
This is the most important thing to understand about NFT taxes.
Standard Long-Term Capital Gains
Holding Period | Tax Rate |
|---|---|
≤ 1 year (short-term) | 10% – 37% (ordinary income rates) |
> 1 year (long-term) | 0%, 15%, or 20% |
Collectibles Tax Rate
Holding Period | Tax Rate |
|---|---|
≤ 1 year (short-term) | 10% – 37% (ordinary income rates) |
> 1 year (long-term) | Up to 28% |
The difference: If your NFT is classified as a collectible, you could pay 8% more on long-term gains.
Is Your NFT a "Collectible"?
The IRS uses a "look-through analysis" to determine if your NFT is a collectible.
They look at what the NFT represents, not just that it's a token.
NFTs Likely Classified as Collectibles:
Type | Why It's a Collectible |
|---|---|
Digital art (1/1 pieces, generative art) | Represents artwork |
Trading cards (NBA Top Shot, Sorare) | Represents collectible cards |
NFTs tied to physical art/gems/antiques | Represents underlying collectible |
Music NFTs (limited editions) | May represent collectible recordings |
PFP collections (Bored Apes, CryptoPunks) | Likely treated as art/collectibles |
NFTs Probably NOT Collectibles:
Type | Why It's Regular Property |
|---|---|
Virtual land (Decentraland, Sandbox) | Real estate, not collectible |
Gaming items/utility NFTs | Functional items |
Membership/access passes | Service access, not collectible |
Domain name NFTs (ENS) | Intangible property |
⚠️ Important: The IRS is still refining this guidance. When in doubt, consult a tax professional.
NFT Taxes: Creator vs. Investor
Your tax treatment depends heavily on who you are and what you're doing.
Role | Primary Tax Type | Rate |
|---|---|---|
Creator (minting & selling your own NFTs) | Ordinary Income + Self-Employment Tax | 10% – 37% + 15.3% SE tax |
Investor (buying & selling NFTs) | Capital Gains | 0% – 28% |
Flipper (frequent trading as business) | Ordinary Income | 10% – 37% |
For NFT CREATORS: The Complete Breakdown
Minting Your NFT
Minting itself is NOT a taxable event — you're creating property, not selling it.
However: If you pay gas fees in ETH to mint, and that ETH has appreciated since you bought it, that's a taxable event.
Example:
You spend 0.1 ETH to mint an NFT
You originally bought that 0.1 ETH for $100
At minting time, 0.1 ETH = $300
Taxable capital gain on the ETH: $200
Your new NFT's cost basis = $300 (the FMV of the ETH spent)
Selling Your NFT (Primary Sale)
When you sell an NFT you created, the proceeds are ordinary income — not capital gains.
Why? You're selling something you made, similar to selling your services.
Example:
Amount | |
|---|---|
NFT sells for | $2,000 |
Minting/platform fees | ($50) |
Taxable ordinary income | $1,950 |
This income is taxed at your ordinary income rate (10% – 37%).
If NFT creation is your business: You'll also owe self-employment tax (15.3%) on top of income tax.
NFT Royalties
This is where creators often get caught off guard.
Royalties = Ordinary Income (taxed when received)
Every time your NFT resells and you earn a royalty, that's taxable income.
Example:
Your NFT resells for 10 ETH
Your 5% royalty = 0.5 ETH
ETH price at time of royalty: $3,000/ETH
Taxable ordinary income: $1,500
You don't need to sell the ETH — you owe income tax the moment you receive it.
If you're a professional creator: Royalties are also subject to self-employment tax.
Creator Tax Forms
Situation | Form to Use |
|---|---|
Occasional/hobby creator | Schedule 1 (Line 8z – Other Income) |
Professional creator (business) | Schedule C |
Passive royalty income (one-off) | Schedule E |
For NFT INVESTORS: The Complete Breakdown
Buying an NFT
Buying an NFT with fiat (USD) = Not taxable
Buying an NFT with crypto (ETH, SOL, etc.) = TAXABLE
This catches many people off guard. When you use ETH to buy an NFT, you're disposing of the ETH — triggering capital gains.
Example:
Amount | |
|---|---|
You bought 2 ETH for | $2,000 |
ETH value when you buy NFT | $6,000 |
Capital gain on ETH | $4,000 |
You owe taxes on the $4,000 gain — even though you didn't sell for cash.
Your NFT's cost basis = $6,000 (what the ETH was worth when you bought it)
Selling an NFT
When you sell an NFT for a profit, you owe capital gains tax.
Example:
Amount | |
|---|---|
NFT cost basis | $1,000 |
Sold NFT for | $5,000 |
Platform/gas fees | ($200) |
Taxable capital gain | $3,800 |
Tax rate depends on holding period:
Held ≤ 1 year → Short-term rate (10% – 37%)
Held > 1 year → Long-term rate (0% – 20%, or 28% if collectible)
NFT-to-NFT Swaps
Trading one NFT for another = Taxable Event
The IRS treats this as:
Selling NFT #1 (triggers capital gain/loss)
Buying NFT #2
Example:
You own NFT #1 (cost basis $500)
You swap it for NFT #2 (FMV $2,000)
Taxable capital gain: $1,500
Your new NFT #2's cost basis = $2,000
Investor Tax Forms
Form | Purpose |
|---|---|
Form 8949 | Report each NFT sale (gains/losses) |
Schedule D | Summarize capital gains/losses |
28% Rate Gain Worksheet | If NFT is classified as collectible |
Pro tip: Report collectible NFTs on a separate Form 8949 from your other crypto to ensure correct tax rates are applied.
Gas Fees: Your Secret Tax Deduction
Gas fees can reduce your taxable gains by increasing your cost basis.
How It Works:
Fee Type | How to Treat It |
|---|---|
Gas fees to buy/mint NFT | Add to cost basis |
Gas fees to sell NFT | Subtract from proceeds |
Platform fees (OpenSea, Blur) | Add to cost basis or subtract from proceeds |
Example:
Amount | |
|---|---|
Bought NFT for | $1,000 |
Gas fee to buy | $50 |
Cost basis | $1,050 |
Sold NFT for | $2,000 |
Gas fee to sell | $30 |
Net proceeds | $1,970 |
Taxable gain | $920 (not $1,000) |
Track every gas fee. It adds up.
Airdrops & Free NFTs
Received a free NFT airdrop? That's taxable income.
The IRS treats airdrops as ordinary income at the fair market value when you receive it.
Example:
You receive an airdropped NFT
FMV at time of receipt: $500
Taxable ordinary income: $500
Your cost basis in that NFT = $500
If you later sell it for $800, you have a $300 capital gain.
Play-to-Earn Gaming NFTs
In-game NFTs and tokens earned through gameplay are taxable income when received.
Event | Tax Treatment |
|---|---|
Earning NFT through gameplay | Ordinary income (FMV when received) |
Selling in-game NFT | Capital gains/loss |
Trading game NFTs | Capital gains/loss |
The $600 Reporting Threshold
Starting in 2025, NFT marketplaces must report your sales to the IRS.
Threshold | What Happens |
|---|---|
NFT sales > $600/year | Marketplace reports to IRS (aggregated) |
NFT sales ≤ $600/year | May not receive 1099, but still taxable |
Key point: This threshold only affects what the marketplace reports — you're required to report all NFT transactions regardless of amount.
Common Taxable Events Summary
Action | Taxable? | Tax Type |
|---|---|---|
Minting your own NFT | ❌ (but gas fees may trigger crypto gain) | — |
Selling NFT you created | ✅ | Ordinary Income |
Receiving royalties | ✅ | Ordinary Income |
Buying NFT with crypto | ✅ | Capital Gains (on crypto used) |
Selling NFT for profit | ✅ | Capital Gains |
Trading NFT for NFT | ✅ | Capital Gains |
Receiving airdropped NFT | ✅ | Ordinary Income |
Transferring NFT between your wallets | ❌ | — |
Gifting NFT (under $19K) | ❌ | — |
NFT becomes worthless | ✅ | Capital Loss (deductible) |
Worthless NFTs: Claim Your Losses
Got NFTs that are now worth nothing? You may be able to claim a capital loss.
Requirements:
The NFT must be truly worthless (no market, no value)
You must "abandon" or sell it (even for $0)
Tax benefit:
Losses offset capital gains
Up to $3,000 of excess losses offset ordinary income
Remaining losses carry forward to future years
Pro tip: Some services let you "burn" worthless NFTs to establish the loss for tax purposes.
Donating NFTs
Donating NFTs to qualified charities can provide tax benefits:
✅ Not a taxable sale (no capital gains owed)
✅ Potential charitable deduction (fair market value)
✅ Must hold NFT > 1 year for full FMV deduction
Requirements:
Charity must be 501(c)(3) qualified
May need professional appraisal for high-value NFTs
Transfer directly to charity (don't sell first)
Valuation Challenges: What's Your NFT Worth?
Unlike stocks, NFTs don't have clear market prices. Common valuation methods:
Method | How It Works |
|---|---|
Last sale price | What you actually paid/received |
Floor price | Lowest listed price in collection |
Comparable sales | Recent sales of similar NFTs |
Appraisal | Professional valuation (for high-value NFTs) |
Best practice: Use the most defensible method and document your reasoning.
5 Tax-Saving Strategies for NFTs
1. Hold for 366+ Days
Long-term rates (even at 28% for collectibles) beat short-term rates (up to 37%).
2. Track All Gas Fees
Every fee increases your cost basis and reduces taxable gains.
3. Harvest Losses
Sell worthless or underwater NFTs to offset gains from winners.
4. Donate Appreciated NFTs
Skip capital gains entirely while getting a charitable deduction.
5. Consider Timing
Sell in years when your income is lower to stay in lower tax brackets.
Key Deadlines for 2025
Date | What Happens |
|---|---|
Throughout 2025 | NFT marketplaces track all transactions |
Feb 17, 2026 | Receive 1099-DA from marketplaces (if applicable) |
April 15, 2026 | File 2025 tax return |
2026 onwards | Marketplaces report cost basis (not just proceeds) |
The Bottom Line
NFT taxes are more complex than regular crypto — between the 28% collectible rate, creator royalties, and the ETH-to-NFT purchase trap, there are plenty of ways to get tripped up.
Your checklist:
[ ] Determine if your NFTs are likely collectibles (28% rate)
[ ] Track every transaction, gas fee, and royalty payment
[ ] Remember: buying NFTs with ETH triggers capital gains on the ETH
[ ] Creators: report sales as ordinary income (+ self-employment tax if professional)
[ ] Use crypto tax software to track FMV and cost basis
[ ] Consider professional help for complex situations
The IRS is watching NFT marketplaces like never before. Stay compliant, and you'll sleep better at night.
Disclaimer: This article is for informational purposes only and does not constitute tax, legal, or financial advice. Tax laws are complex and subject to change. Please consult a qualified tax professional for advice specific to your situation.
By Ran Chen, EA, CFP®