NFT capital gains tax: rates, the collectible question and Form 1099-DA

How the IRS taxes an NFT you sell

For federal tax purposes an NFT is a digital asset, and digital assets are property, not currency (IRS digital assets page, 2026). Selling one for dollars, swapping it for cryptocurrency or trading it for another NFT is a disposition: you compare what you received, measured in U.S. dollars when the transaction is recorded on the blockchain, with your basis, which is what you paid plus fees. Hold it more than one year and the gain is long-term; one year or less and it is short-term, taxed at ordinary rates.

What makes NFTs different from coins or stock is the rate on long-term gain. Most long-term gain gets 0%, 15% or 20% (20% above $545,500 of taxable income for single filers, Rev. Proc. 2025-32, 2026; more in the long-term capital gains guide). Collectibles get ordinary rates capped at 28% under IRC 1(h)(4) and 1(h)(5). So the question every serious NFT seller has to answer is whether the token is a collectible.

Are NFTs collectibles? The look-through test

The Code defines collectibles in IRC 408(m)(2): any work of art, any rug or antique, any metal or gem, any stamp or coin, any alcoholic beverage, and any other tangible personal property Treasury specifies. An NFT is none of those on its face. In Notice 2023-27 (March 2023) the IRS said that, until it issues formal guidance, it will use a look-through analysis: the NFT is a collectible if its associated right or asset is a collectible.

• Collectible: the notice's own example is an NFT that certifies ownership of a gem. By the same logic, an NFT that is a title to a vaulted gold bar, a graded coin or a bottle of wine should be a collectible.
• Not a collectible: the notice's example is an NFT that gives a right to use or develop a plot of land in a virtual world. Memberships, event tickets and in-game utility usually sit here too.
• Open: an NFT tied to a digital image, music or video. The notice says Treasury is still considering whether a digital file can be a "work of art" under 408(m)(2)(A), and a footnote says it currently believes digital files fall outside the rug, antique, metal, gem, stamp, coin and alcoholic beverage categories.

We checked the IRS digital assets page in October 2026: it still lists Notice 2023-27 as the NFT collectibles guidance, and we found no final rule. That means the most common NFT, a profile picture or digital art piece, has no settled answer. Reporting it at regular capital gains rates is a position some preparers take; reporting it at the collectible rate is the cautious one. Document which you chose and why, and revisit it if Treasury acts.

What the collectible label costs: the numbers

Take a single filer in California with $400,000 of other income who sells an NFT for a $400,000 long-term gain in 2026. At regular capital gains rates the sale causes $136,294 of tax: $75,896 federal, $15,200 of net investment income tax and $45,199 to California. If the NFT is a collectible, the same sale causes $176,374, so the label is worth $40,080 here. Sold within a year, the gain is short-term and the bill rises to $203,265.

Two things in those numbers are worth knowing. California taxes every capital gain as ordinary income at up to 12.3%, plus 1% on income over $1 million (FTB, 2026), so the state line does not change with the collectible question; see the California capital gains page. And the 3.8% NIIT under IRC 1411 applies above $200,000 of modified AGI for single filers whether or not the NFT is a collectible; the NIIT guide covers who escapes it.

Creators: minting and selling your own NFTs

The look-through test matters to collectors. If you created the artwork or music behind the NFT, the collectible question mostly drops away, because your work is not a capital asset at all. IRC 1221(a)(3) excludes from capital assets a literary, musical or artistic composition held by the person whose personal efforts created it, and also by anyone whose basis carries over from the creator, such as someone who received it as a gift. Primary sales of your own NFTs are therefore ordinary income.

• Trade or business: if you mint and sell regularly to make money, net profit goes on Schedule C and is generally subject to self-employment tax under IRC 1402 on top of income tax.
• Royalties paid to you on secondary sales are ordinary income when received.
• Paid in crypto: income is the fair market value of the crypto in dollars when you receive it, and that value becomes your basis in the crypto (IRS virtual currency FAQs 12 and 13).

Gas fees and platform fees you pay to mint are costs of the business or part of your basis, depending on how you operate; keep the wallet records either way.

Buying an NFT with crypto is two transactions

Most NFTs are bought with cryptocurrency, and that purchase is itself a taxable sale of the crypto. The IRS says that exchanging virtual currency held as a capital asset for other property, including another digital asset, produces capital gain or loss, measured as the value of what you received minus your basis in the crypto you gave up (virtual currency FAQs 16 and 17). Your basis in the NFT is its fair market value at the time of the exchange (FAQ 18).

Example of the trap: you bought ETH for $5,000, it grew to $60,000, and you spent it on one NFT. You owe tax on $55,000 of crypto gain that year even though you never touched dollars, and your NFT starts with a $60,000 basis. Swapping one NFT for another, or for crypto, works the same way: each leg is a disposition. The like-kind exchange rules do not help, because since 2018 IRC 1031 covers only real property.

Form 1099-DA: what brokers report

Under final regulations issued in 2024 (Treas. Reg. 1.6045-1), custodial platforms that take possession of digital assets must report sales on the new Form 1099-DA: gross proceeds for transactions on or after January 1, 2025, and basis for certain transactions on or after January 1, 2026 (IRS digital assets page, 2026). Two NFT-specific points:

• Specified NFTs are digital assets that are indivisible, unique and do not give an interest in certain excluded property such as securities (Treas. Reg. 1.6045-1(d)(10)(iv)).
• A broker using the optional method for specified NFTs does not have to report them at all when your aggregate gross proceeds from specified NFT sales are $600 or less for the year (Instructions for Form 1099-DA, 2025).

The final rules do not cover decentralized or non-custodial platforms that never hold your assets, so many peer-to-peer NFT trades produce no form. No form does not mean no tax: the digital asset question on page one of Form 1040 still has to be answered, and every disposition still goes on Form 8949. Long-term collectibles go in Part II with code C and cannot be aggregated on Schedule D line 8a (Instructions for Form 8949, 2025).

Losses, wash sales and worthless NFTs

NFT prices fell hard after 2022, so losses are the more common question. An NFT bought for profit is an investment asset, and a loss on selling it is a capital loss that offsets gains and then up to $3,000 a year of ordinary income, with the rest carried forward (IRC 1211 and 1212; see tax-loss harvesting and capital loss carryover). IRC 165(c) limits individual losses to trade or business losses, transactions entered into for profit and certain casualties, so an NFT you bought purely to display has a weaker case for a deduction.

The wash sale rule in IRC 1091 disallows losses on "stock or securities" repurchased within 30 days. As of October 2026 the statute still says stock or securities, and an NFT is neither, so selling at a loss and buying back is not blocked by 1091 today. Two cautions: an NFT that is really an interest in a business or fund could be a security, and a sale to yourself or a related wallet with no change in economic position invites a challenge under general substance rules. Merely seeing a floor price fall to zero is not a sale; to claim the loss you generally need a disposition, such as a sale for a nominal amount to an unrelated buyer.

Big NFT gains: planning before the sale

Large NFT gains get the same tools as other appreciated property, with a few limits:

• Timing: waiting past the one-year mark turns ordinary rates into capital gain rates, the difference between $203,265 and $136,294 in our example; see year-end timing.
• Harvesting: realized NFT or crypto losses in the same year absorb the gain first.
• Giving: a gift of an NFT held over a year to a public charity is generally deductible at fair market value, but a deduction over $5,000 needs a qualified appraisal (IRC 170(f)(11)(C)); a donor-advised fund may accept it if it can take the token.
• Moving: a California resident who becomes a resident of a no-income-tax state before selling avoids the state layer on an intangible asset, if the move is real; see moving states before a sale.

See how NFTs fit with gold, art, coins and cards on the collectibles capital gains tax page. Get the Big Sale Tax Analysis.

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