How are NFTs taxed when I buy, sell, or create them in 2025?

The IRS treats NFTs as property, similar to other digital assets. The tax treatment depends on whether you are a buyer/seller or a creator.

Buying and selling NFTs:

• Selling an NFT at a profit triggers a capital gain. Short-term (held 1 year or less) gains are taxed at ordinary income rates (10-37%). Long-term gains (held over 1 year) may be taxed at the collectibles rate of 28% rather than the standard 15/20% long-term rate, depending on IRS classification.
• In March 2023, the IRS issued Notice 2023-27 indicating that some NFTs may be treated as collectibles (like art or stamps), subject to the 28% maximum long-term rate. The determination depends on whether the underlying asset the NFT represents is a collectible.
• Using cryptocurrency to buy an NFT is a taxable event for the crypto. You must report the gain or loss on the crypto used for the purchase.

Creating and selling NFTs:

• If you create NFTs as a business, the income is ordinary income reported on Schedule C. You owe self-employment tax (15.3%) on net profit.
• Deductible expenses include platform fees (OpenSea, Rarible), gas fees for minting, software and equipment used for creation, and marketing costs.
• Royalties received on secondary sales are also ordinary income.

Record keeping is critical: Track the date and cost of every NFT purchase (including gas fees, which are part of your cost basis), the date and proceeds of every sale, and the fair market value of any crypto used in transactions. The IRS requires reporting on Form 8949 and Schedule D for sales.

Gas fees: Gas fees paid to mint, buy, or sell NFTs can be added to your cost basis (reducing your gain) or treated as selling expenses (reducing your proceeds).