Educational-use notice
This guide provides general U.S. federal tax information about NFTs, not individualized tax, legal, accounting, or investment advice. NFT tax treatment can depend heavily on the specific rights the NFT represents, how it was acquired, and facts that vary by transaction. The IRS's collectibles guidance for NFTs remains preliminary. State and international rules may differ. Consult a qualified tax professional when a transaction is material, disputed, unusual, or difficult to classify.
Key Takeaways
- The IRS treats NFTs as digital assets and, like other digital assets, as property. Buying, selling, and swapping an NFT generally follow the same property-tax framework used for coins and tokens.
- Minting an NFT is not the same event as buying one. The mint price and mint gas fee are generally capitalized into basis; they are not automatically the same as a taxable purchase from a third party, though a mint fee paid to a platform is still an acquisition cost either way.
- Gas fees generally add to basis when incurred to acquire an NFT, and generally reduce amount realized when incurred to sell one. A gas fee paid in crypto can itself trigger a small separate gain or loss.
- IRS Notice 2023-27 (2023) proposes a "look-through analysis": an NFT may be treated as a collectible — subject to the higher 28% long-term collectibles rate rather than standard capital-gains rates — if the right or asset it represents falls within the Section 408(m) definition of a collectible, such as a gem or a work of art.
- The look-through analysis is preliminary guidance, not final regulations. Which NFTs it actually reaches, and how, remains an open and evolving question.
- Ongoing secondary-sale royalties paid to a creator are generally ordinary income at the time received, not capital gain — a different tax character from the capital gain or loss a collector realizes on a resale.
- A creator whose NFT activity rises to a trade or business may owe self-employment tax on royalty and sales income, in addition to income tax.
What Is an NFT for Tax Purposes?
A non-fungible token (NFT) is a unique, non-interchangeable unit of data recorded on a blockchain, typically used to certify ownership of, or a right associated with, a specific digital or physical item — artwork, a collectible, an in-game item, a music file, event access, or membership rights, among many other uses. The IRS's digital-asset guidance groups NFTs together with cryptocurrencies and stablecoins under the broader "digital asset" definition: a digital representation of value recorded on a cryptographically secured distributed ledger.
That shared classification means the general property-tax principles that apply to buying, selling, and swapping cryptocurrency also apply to NFTs. But an NFT is not simply "a token." It is a claim to something — sometimes an image file hosted off-chain, sometimes a right to redeem a physical item, sometimes governance or access rights, sometimes nothing beyond the token's own on-chain record. What the NFT actually represents affects both its economic character and, per IRS Notice 2023-27's proposed approach, potentially its tax rate on sale.
NFT tax treatment starts from the same property framework used for other digital assets — basis, amount realized, gain or loss, holding period — with two additions specific to NFTs: a preliminary IRS test for whether a particular NFT counts as a "collectible" subject to a higher rate, and the distinction between minting and buying, which affects how basis is established.
The Baseline: NFTs Are Property, Not Currency
Because the IRS treats digital assets — including NFTs — as property, the general tax mechanics look the same as they do for a stock, a coin, or any other capital asset:
- Buying an NFT with cash or crypto is generally an acquisition, not a taxable disposal of the NFT itself. It establishes basis. (Paying with crypto is a different story for the crypto side — see below.)
- Holding an NFT without transacting does not create a taxable event. Value fluctuations while holding are unrealized.
- Selling, swapping, or spending an NFT is generally a disposition that can create a reportable gain or loss, measured against the NFT's adjusted basis.
- Gifting or donating an NFT follows the same general gift and charitable-contribution rules that apply to other property, including donor-basis carryover for gifts and appraisal requirements for larger charitable donations of property.
Where NFTs diverge from a simple coin purchase is in two places: how the asset used to pay for the NFT is itself treated, and whether the specific NFT falls into the IRS's proposed collectibles category. Both are covered in the sections below.
If crypto is used to buy an NFT rather than U.S. dollars, that payment is a disposal of the crypto used — a swap, in effect. The crypto's fair market value at the time of the purchase, compared against its adjusted basis, produces a separate gain or loss on the crypto leg of the transaction, independent of whatever happens to the NFT later. This is easy to overlook because the NFT purchase feels like a single action; it is actually two: a disposal of crypto and an acquisition of the NFT.
Minting vs. Buying: Why the Distinction Matters
"Minting" and "buying" an NFT are often used loosely as synonyms, but they describe different economic events, and the recordkeeping and tax analysis differ depending on which one occurred.
Minting an NFT
Minting is the act of creating a new NFT on-chain — calling a smart contract function that generates a new, unique token and assigns it to an address for the first time. Two distinct roles can be involved:
- Minting as a collector or investor: Paying a mint price (often to a project's smart contract) to receive a newly created NFT. This is economically closer to a first-sale purchase than to "creating" anything yourself — the collector pays value and receives an asset. The mint price paid, plus the gas fee incurred to execute the mint transaction, are generally capitalized into the NFT's basis, the same way a purchase price and a brokerage fee would be.
- Minting as the original creator: Deploying or calling a contract to bring a new NFT into existence that the creator then intends to sell, keep, or distribute. The act of minting itself is not automatically an income event for the creator — value has not necessarily changed hands yet. Income is generally recognized when the creator disposes of the NFT (sale) or receives value in connection with the mint (a mint fee charged to buyers, a royalty, or other compensation). The gas fee the creator pays to mint is generally treated as a cost of getting the asset into existence — for a creator holding inventory for sale, this is closer to a cost of goods than a current deduction; for a creator minting a one-off personal NFT, it is generally capitalized into the NFT's basis for whenever it's later disposed of.
Buying an NFT
Buying is a straightforward secondary-market or primary-sale purchase from another party — an exchange of cash or crypto for an NFT someone else already holds, or a primary sale where the seller (not necessarily the minter) transfers a freshly minted token immediately upon sale. From the buyer's side, buying and minting-as-a-collector produce a similar tax result: the purchase price plus qualifying acquisition costs (gas, marketplace fees paid by the buyer) become the NFT's basis. The practical difference tends to matter more for recordkeeping — a mint transaction is documented by the mint transaction hash and the project's contract, while a secondary purchase is documented by the marketplace listing, the seller, and the sale transaction hash — and for the creator's side of the transaction, where minting can trigger income obligations that a pure buyer never has.
| Scenario | Basis treatment | Income event? |
|---|---|---|
| Collector mints from a project contract | Mint price + mint gas fee become basis | No income to the minter from the act of minting itself |
| Collector buys on secondary market | Purchase price + gas + marketplace fee become basis | No income to the buyer |
| Creator mints and later sells | Mint gas generally capitalized; not deducted immediately | Income recognized on sale (or on receipt of a separate mint fee, if charged) |
| Creator receives a mint fee from buyers | Not applicable to the creator's basis in the NFT they no longer hold | Yes — ordinary income at FMV received |
Gas Fees and NFT Basis
Every on-chain NFT action — minting, buying, selling, transferring, or approving a marketplace contract — typically requires a gas fee paid in the network's native asset. How that gas fee is treated depends on what it was attached to:
- Gas paid to mint or buy an NFT: Generally a qualifying acquisition cost, added to the NFT's basis.
- Gas paid to sell or transfer an NFT to a new owner: Generally a qualifying disposition cost, which reduces the amount realized on the sale.
- Gas paid to approve a marketplace contract (without a corresponding sale): A cost connected to a transaction that has not yet occurred; treatment can depend on whether and how the eventual related transaction is completed.
- Gas paid to move an NFT between the taxpayer's own wallets: Not an acquisition or disposition cost of the NFT itself, since no change in beneficial ownership occurred — but the fee units used to pay gas are a separate crypto asset, and using them can itself be a small taxable disposal of that crypto, exactly as with any other network fee.
Because gas is paid in crypto, not cash, every gas payment is also potentially a disposal of the crypto used to pay it — a second, usually small, taxable event layered on top of the NFT transaction. A complete NFT ledger entry should separately record the NFT-side treatment (basis addition or amount-realized reduction) and the crypto-side treatment (gain or loss on the fee units), rather than collapsing them into one number.
Selling an NFT: How Gain or Loss Is Calculated
The mechanics mirror any other property disposal: amount realized minus adjusted basis equals gain or loss. For NFTs, amount realized is typically reduced by a marketplace fee (many NFT marketplaces charge a percentage-based commission) and by the seller's gas fee, while adjusted basis reflects the original mint or purchase price plus the buyer-side acquisition costs recorded at the time of acquisition.
Hypothetical example — for education only.
A collector mints an NFT directly from a project's contract for a mint price of 0.08 ETH, worth $200 at the time, plus a mint gas fee of $15. Adjusted basis = $200 + $15 = $215. Fourteen months later, the collector sells the NFT on a marketplace for 0.5 ETH, worth $1,400 at the time of sale. The marketplace charges a 2.5% commission ($35), and the seller pays a $20 gas fee to complete the sale. Amount realized = $1,400 − $35 − $20 = $1,345. Gain = $1,345 − $215 = $1,130. Because the NFT was held more than one year, this is a long-term gain — and whether it is taxed at standard long-term capital-gains rates or at the higher 28% collectibles rate depends on whether the specific NFT falls within the IRS's proposed look-through analysis, discussed next. Separately, receiving 0.5 ETH as sale proceeds is itself an acquisition of ETH with its own new basis of $1,400 for whenever that ETH is later disposed of.
The Collectibles Question: IRS Notice 2023-27
In March 2023, the IRS released Notice 2023-27, preliminary guidance addressing whether certain NFTs should be taxed as "collectibles" under Internal Revenue Code Section 408(m) rather than under the standard capital-asset rules that apply to most property, including most cryptocurrency. The distinction matters because long-term gains on collectibles can be taxed at a maximum rate of 28% — meaningfully higher than the preferential long-term capital-gains rates (0%, 15%, or 20% depending on income) that apply to most other long-term capital assets.
The Look-Through Analysis
Rather than treating every NFT as a collectible or none of them as collectibles, Notice 2023-27 proposes what it calls a "look-through analysis." Under this approach, the IRS looks past the NFT token itself to the underlying right or asset the NFT certifies ownership of. Section 408(m) defines several specific categories as collectibles, including works of art, gems, stamps, rugs or antiques, and certain metals and coins. If the item or right an NFT certifies falls within one of those categories, the notice's proposed approach would treat the NFT as a collectible.
The IRS's own example is illustrative: a gem is a collectible under Section 408(m); an NFT that certifies ownership of a gem would, under the look-through analysis, itself be treated as a collectible. By contrast, an NFT that does not certify ownership of anything in the enumerated collectible categories — for instance, one that certifies a right to a digital-only asset with no listed real-world collectible counterpart — would not automatically fall under the look-through analysis as described.
What Remains Unresolved
Notice 2023-27 is explicitly preliminary. It requested public comments while the IRS develops proposed regulations, and as of this guide's publication, the IRS had not finalized those regulations. That leaves genuinely open questions that a general guide cannot resolve on a taxpayer's behalf:
- Whether a given profile-picture, generative-art, or gaming NFT certifies ownership of anything that maps cleanly onto a Section 408(m) category, or whether it falls outside the enumerated list entirely.
- How the analysis applies to NFTs that bundle multiple rights (for example, both a digital image and a redemption right for a physical collectible).
- Whether and how final regulations might narrow, broaden, or otherwise revise the preliminary approach described in the notice.
- How state tax authorities, which are not bound by federal collectibles characterization, might treat the same NFT.
Because this area is still developing, a taxpayer holding NFTs with a material unrealized gain — particularly NFTs that plausibly certify ownership of art, gems, or another enumerated collectible category — should treat the applicable capital-gains rate as an open question requiring current professional guidance at the time of sale, not something this guide (or any general resource) can settle in advance.
Royalty Income for Creators
Many NFT smart contracts are built to pay the original creator a percentage of the sale price every time the NFT changes hands on the secondary market — a royalty that can continue indefinitely, independent of whether the creator still holds the NFT. That royalty stream has a different tax character than the capital gain or loss a collector recognizes on a resale.
- Royalties are generally ordinary income, not capital gain. Each royalty payment is measured at its fair market value on the date received, regardless of what the creator originally sold the NFT for.
- Royalties paid in crypto establish basis in that crypto. The FMV recognized as income becomes the creator's starting basis in the received tokens, exactly like a staking reward or a payment for services — a later sale or swap of those tokens triggers its own separate capital gain or loss calculation.
- Ongoing, recurring royalty activity can indicate a trade or business. A creator who mints and sells NFTs with continuity, regularity, and a profit motive may have activity that rises to the level of a trade or business, which can bring self-employment tax into play in addition to ordinary income tax, and may shift reporting toward Schedule C rather than treating the activity as a passive investment.
- Smart-contract royalties are not always collected reliably. Some marketplaces do not enforce on-chain royalty terms, so actual royalty receipts can differ from the percentage written into the original contract. Track what was actually received, not what the contract nominally promises.
Hypothetical example — for education only.
A digital artist mints and sells an NFT collection with a 5% secondary-sale royalty coded into the contract. Over the year, the artist receives royalty payments totaling 0.4 ETH across several secondary sales, valued at $1,100 in aggregate at the time each payment was received. The artist recognizes $1,100 of ordinary income for the year (the sum of each payment's FMV at receipt), which also becomes the artist's aggregate basis in the 0.4 ETH received. If the artist's minting and selling activity is regular and profit-driven, this income may be reported on Schedule C and could be subject to self-employment tax; if it is occasional and not run like a business, it may instead be reported as other income. Which applies depends on the facts of the artist's activity.
Common NFT Tax Misconceptions
| Misconception | More accurate framing |
|---|---|
| "NFTs are exempt from tax because they're not really currency." | NFTs are digital assets treated as property, the same broad category that applies to cryptocurrency. Property is generally taxable on disposal; being non-fungible doesn't create an exemption. |
| "All NFTs are automatically taxed at the 28% collectibles rate." | Only NFTs whose underlying right or asset falls within the Section 408(m) collectibles categories are candidates for that rate under the IRS's proposed look-through analysis — and that guidance is still preliminary, not final. |
| "Minting an NFT and buying one are the same thing for tax purposes." | They can produce similar basis outcomes for a collector, but minting as the original creator carries income implications a pure buyer never has, and the recordkeeping trail differs. |
| "Gas fees are just a cost of doing business — they don't affect my taxes." | Gas fees generally do affect taxes: they adjust the NFT's basis or amount realized, and because they're paid in crypto, the fee payment itself can be a small separate taxable disposal. |
| "Royalty income is a capital gain because it's tied to an NFT sale." | Royalty income received by the creator is generally ordinary income at the time received, distinct from the capital gain or loss the seller recognizes on the resale itself. |
| "If the marketplace doesn't send me a tax form, I don't have to report NFT sales." | Taxpayers must report taxable digital-asset gain, loss, and income whether or not they receive a Form 1099 or other payee statement. |
Practical NFT Recordkeeping Checklist
Use this checklist alongside the broader crypto tax ledger described in the Crypto Taxes and Recordkeeping pillar guide. For every NFT transaction, confirm the following are captured:
- Whether the event was a mint, a primary purchase, a secondary purchase, a sale, a transfer, a gift, or a donation.
- The smart-contract address and token ID — the only reliable unique identifier for a specific NFT, since project and collection names can be duplicated or spoofed.
- The blockchain the NFT lives on, since bridged or wrapped versions of a collection can exist on multiple chains.
- Mint price or purchase price, and the currency (cash or crypto) used to pay it.
- Gas fee amount, asset, and FMV at the time paid, tagged to whether it was an acquisition or disposition cost.
- Marketplace commission or platform fee deducted from sale proceeds.
- Date and time of acquisition, for holding-period tracking.
- FMV of the NFT and of any crypto received, at the time of each disposal.
- Whether the taxpayer is the original creator (royalty and potential self-employment implications) or a collector (capital gain/loss only).
- Every royalty payment received, with its FMV at receipt date, if the taxpayer is a creator.
- A working note on whether the specific NFT plausibly falls within the IRS's proposed collectibles look-through analysis, flagged for professional review before filing if the position is material.
- Marketplace transaction hash and screenshot or export, retained as original, unmodified evidence.
Sources and Methodology
This guide is based on publicly available IRS guidance as of July 2026. Key sources include:
- IRS Notice 2023-27: Preliminary IRS guidance describing the proposed look-through analysis for determining when an NFT is treated as a collectible under Section 408(m), and requesting public comment ahead of proposed regulations.
- IRS digital-asset guidance (IRS.gov): The IRS's dedicated digital-assets page, which groups NFTs with other digital assets under the general property-tax framework.
- Internal Revenue Code Section 408(m): The statutory definition of "collectible," including works of art, gems, stamps, rugs or antiques, and certain metals and coins, referenced by the look-through analysis.
This content was reviewed by the Swoopr Markets Education Team in August 2026 and reflects U.S. federal tax guidance available at that time. The NFT collectibles question in particular remains an evolving, preliminary area of IRS guidance — verify current guidance before relying on any information in this section.
NFT Tax Treatment FAQs
Are NFTs taxed the same way as other cryptocurrency?
In general, yes. The IRS treats NFTs as digital assets and, like other digital assets, as property rather than currency. Buying, selling, swapping, and receiving an NFT follow the same basic property-tax framework used for coins and tokens. The main difference is that some NFTs may also be subject to a separate collectibles analysis that does not apply to ordinary fungible cryptocurrency.
What is the IRS look-through analysis for NFTs?
Notice 2023-27 describes a proposed look-through analysis under which an NFT is examined based on the underlying right or asset it certifies ownership of, not the NFT token itself. If that underlying asset falls within the Section 408(m) definition of a collectible, such as a gem or a work of art, the IRS's proposed approach would treat the NFT as a collectible for tax purposes. This guidance remains preliminary, pending final regulations.
Do all NFTs get taxed at the 28% collectibles rate?
No. Under the proposed look-through analysis, only NFTs whose underlying right or asset meets the Section 408(m) collectibles definition would be candidates for the higher long-term collectibles rate of up to 28%. Most profile-picture and generative-art NFTs do not obviously certify ownership of a listed collectible category, so their treatment is less clear and remains an open question pending final IRS guidance.
Is minting an NFT a taxable event?
Minting an NFT you intend to hold or sell is generally not itself a sale, but it is not tax-free either. The mint price and gas fee paid to create the token are generally capitalized into the NFT's basis rather than deducted immediately. If the creator receives compensation, royalties, or other value in connection with the mint, that receipt can separately create ordinary income.
Do gas fees count toward NFT cost basis?
Gas fees paid to mint or purchase an NFT are generally treated as a qualifying acquisition cost and added to the NFT's basis. Gas fees paid to sell or transfer an NFT to a new owner are generally treated as a disposition cost that reduces the amount realized. Gas fees paid in crypto can also trigger a separate small gain or loss on the fee units themselves.
How are NFT royalties taxed for creators?
Ongoing secondary-sale royalties paid to an NFT's original creator are generally ordinary income, measured at the fair market value of what was received at the time of receipt, not capital gain. If the creator's NFT activity rises to the level of a trade or business, royalty income may also be subject to self-employment tax and reported on Schedule C.
How do I calculate gain or loss when I sell an NFT?
Subtract the NFT's adjusted basis (purchase or mint price, plus qualifying acquisition costs such as gas fees) from the amount realized (sale proceeds, less qualifying disposition costs such as marketplace fees and gas). The result is gain or loss. Whether it is short-term or long-term depends on the holding period, and whether the standard capital-gains rates or the collectibles rate applies depends on the unresolved look-through question.
Is this guide personalized tax advice?
No. This guide provides general U.S. federal tax education about NFTs, not individualized tax, legal, accounting, or investment advice. NFT tax treatment can depend heavily on the specific rights the NFT represents and remains an evolving area of IRS guidance. Consult a qualified tax professional before making decisions about NFT transactions.