How NFTs Are Taxed in 2026

NFTs occupy genuinely uncertain tax territory. The IRS has issued initial guidance — but more is coming, and the rules that apply to your NFT depend heavily on what it represents, how you got it, and what you did with it. Here’s the full picture as of 2026.

What the IRS says: Notice 2023-27

On March 21, 2023, the IRS released Notice 2023-27, which announced the agency’s plans to issue formal guidance on when NFTs will be treated as collectibles under IRC §408(m). That matters because collectibles are subject to a maximum 28% federal long-term capital gains rate — higher than the 20% cap that applies to stocks and most other assets.

Until that final guidance arrives, the IRS uses a “look-through analysis”: an NFT is treated as a collectible if the underlying right or asset associated with the NFT is itself a collectible for tax purposes.

Which NFTs are collectibles — and which aren’t

Under the look-through framework, the outcome turns on what the NFT grants access to or represents:

• Digital art NFTs (PFPs, generative art, 1/1 pieces): Most likely collectibles. The IRS is expected to further assess whether a digital file can constitute a “work of art” under §408(m)(2)(A). The agency has signaled it will address this in forthcoming guidance.
• NFTs tied to physical collectibles (graded cards, wine, physical art): Treated as collectibles — the underlying asset is clearly a collectible.
• Gaming and metaverse NFTs (virtual land, in-game skins, items): Likely not collectibles. Rights to intangible digital property don’t fall under §408(m), which only covers tangible personal property.
• Utility and membership NFTs: Unclear. The IRS has not addressed these specifically. Conservative approach: treat as a capital asset and report accordingly.

Minting an NFT: not a taxable event

Creating (“minting”) an NFT yourself is generally not a taxable event. The process of generating a unique cryptographic token and recording it on a blockchain doesn’t represent a sale or exchange of property. The tax consequences come later — when the NFT is sold or exchanged.

Buying an NFT with cryptocurrency: the barter twist

If you pay for an NFT using cryptocurrency rather than U.S. dollars, the IRS treats this as a barter transaction. You have two taxable events in one:

1. Disposing of the crypto: You recognize any gain (or loss) on the crypto you used to pay — based on the difference between its fair market value at the time of payment and your original cost basis in the crypto.
2. Acquiring the NFT: Your cost basis in the NFT is the fair market value of the crypto you exchanged at the time of the transaction.

Selling an NFT: the tax rate depends on who you are

Your tax treatment on an NFT sale has two variables: what you’re selling and who you are for tax purposes.

If you’re an investor (bought to hold or profit)

Hold for more than one year: long-term capital gains treatment. If the NFT is deemed a collectible, the maximum rate is 28%. If not a collectible, the standard 20% cap applies. Hold for one year or less: short-term, taxed as ordinary income up to 37%.

If you’re a creator (you made it)

NFTs you create and sell in the ordinary course of your work are likely ordinary income — not capital gains at any rate. The IRS excludes self-created artistic and literary works from the definition of “capital asset” under IRC §1221. This means a digital artist selling NFTs of their own work pays up to 37% federal, not 28%. No 28% cap, no preferential long-term rate.

If you’re a dealer (you buy and sell NFTs as a business)

Ordinary income at your marginal rate, plus 15.3% self-employment tax on net profit. The upside: full Schedule C deductions for platform fees, transaction costs, and related expenses. See our dealer vs. investor guide for how the IRS makes this classification.

Royalties from secondary sales

Many NFTs embed a royalty rate via smart contract, so creators automatically receive a percentage of every secondary sale. These royalty payments are ordinary income to the creator when received — not capital gains. They’re reported on Schedule C (if part of a business) or Schedule 1 as other income.

Note: royalty enforcement varies significantly by platform. Some have moved to optional royalty models, meaning creators may not receive the amounts the smart contract specifies if the platform doesn’t enforce them.

NIIT: the extra 3.8%

If your modified adjusted gross income exceeds $200,000 (single) or $250,000 (married), the 3.8% Net Investment Income Tax applies to investment income — including NFT gains. This pushes the maximum federal collectibles rate to 31.8%.

Wash sale rules: the current loophole

The wash sale rules — which prevent investors from claiming a tax loss while immediately repurchasing the same asset — currently apply only to securities. The IRS treats crypto and NFTs as property, not securities. This means you can currently sell an NFT at a loss, claim the deduction, and immediately rebuy the same or similar NFT without triggering the wash sale rule.

Congress has discussed closing this loophole for digital assets. Until legislation passes, it remains available — but practitioners should monitor developments closely.

How to report NFT sales

The IRS updated Form 1040 for the 2022 tax year, replacing the term “cryptocurrency” with “digital assets,” which explicitly includes NFTs. You must answer the digital assets question at the top of Form 1040 and report all sales and exchanges.

• Form 8949: Report each NFT sale with date acquired, date sold, proceeds, cost basis, and gain or loss.
• Schedule D: Summarize Form 8949 totals. Long-term collectibles gains go on line 12 and are taxed at the 28% max rate.
• Schedule C or Schedule 1: For creators reporting NFT sales as business income or royalties as ordinary income.

When using tax software, make sure you flag NFT gains correctly. Defaulting to the standard capital gains rate on what may be a collectible will produce an incorrect return. Our reporting guide compares which software handles the 28% rate correctly.