The U.S. Internal Revenue Service (IRS) has announced its intention to unveil guidelines for classifying nonfungible tokens (NFTs) as collectibles within the American tax code.

In a captivating notice issued on March 21, the IRS eagerly sought input from the U.S. public on potential taxation strategies for NFTs as collectibles.

This intriguing development suggests a shift from the current tax treatment of crypto assets in the country, as collectibles are subject to less favorable capital-gains tax provisions compared to other capital assets.

“Until additional guidance is issued, the IRS intends to determine when an NFT is treated as a collectible by using a ‘look-through analysis,’” said the notice. “Under the look-through analysis, an NFT is treated as a collectible if the NFT’s associated right or asset falls under the definition of collectible in the tax code.”

In accordance with the U.S. tax code, the sale of collectibles like coins or artwork is subject to a maximum capital gains tax rate of 28%. The suggested IRS guidance may extend this standard to NFTs that authenticate ownership of collectible items such as coins, art pieces, or comparable assets.

The IRS has set a deadline of June 19 for submitting comments, implying that U.S. taxpayers filing their 2022 returns before April 18 are unlikely to be impacted. Tax forms necessitate that anyone dealing with crypto – whether receiving, earning, transferring, or selling – must confirm their activities to accurately report taxes, with transactions classified as either capital gains or income based on the individual’s status.

In an intriguing development, the IRS unveiled a draft bill in October that proposed consolidating NFTs and cryptocurrencies under a comprehensive “Digital Assets” category for taxation purposes.

Notably, if a U.S. taxpayer holds all digital assets for an entire year or transfers them among self-controlled wallets, there is generally no reporting obligation.

What are your thoughts on this, Gamestarters?