Community Trust ScoreVerified
- Buying NFT with ETH is taxable event in the US
- Crypto and NFT Tax laws are insane – it needs to be updated
- Staking ETH to ETH2.0 is a Taxable event!
- Triggering IRS Transaction
- FIFO (first-in-first-out), LIFO (last-in-first-out), and HIFO (highest-in-first-out)
The Wolf of All Streets Shared: Buying an NFT with ETH in the US triggers a taxable event – the sale of your ETH. If you bought ETH at $100 and “sell” at $2500 to buy an NFT, you are paying a massive premium and owe taxes on the $2400 gain on each ETH. Incredibly annoying.
Community Response: If you are using FIFO accounting (first in first out), then you likely pay taxes on the lowest priced ETH you bought. So you can’t even buy “new” ETH to purchase the NFT. You are still taxed on the gain from the earlier ETH purchase. Better to buy the NFT with USD TBH.
This is a mess. How would this work with CNFT’s since they are always linked to some ADA. Example; you buy a CNFT that cost 5k ADA, you get back the NFT back but it’s linked to ADA, but the ADA you get back is like 1-2, therefore you’re selling at a loss. Thoughts?
You sell your ADA first is what he’s saying. Doesn’t matter which currency. It’s recognized as property not currency.
Bitcoin as a whole need to be considered legal tender. You are now paying state and federal taxes on anything you purchase, with gains of course.
Cryptocurrency getting taxed as a property is the governments dream come true!
What if you buy from a different account? Say have old Ethereum in Coinbase and buy new Ethereum in Gemini?
Which is why sometimes is best to calculate taxes according to ACB (adjusted-cost base); that’s how us Canucks in Canada calculate our taxes, according to CRA (Canada Revenue Agency). FIFO’s only beneficial when you want to make sure you’re only incurring Long-term cap gains.
Ever heard of HIFO? You are not a tax expert so stop with the novice advice.
Yes. That’s why I said if you used FIFO. I was specific. Once you choose a system you are stuck with it. Most accountants recommended FIFO for crypto for years.
Again please stop giving tax advice. Your “advice” on staking income is offered as settled tax law, but that’s far from the case.
You can also change systems. You are not stuck with it.
Imagine a kid playing a game with NFT’s in them, and he defeats a boss and picks up an NFT item in the game worth $10k. Do the parents owe $3k-4k in taxes? This is insane. Tax laws need updated.
As long as they only tax him if he sells it, then it kind of makes sense.
No. You can avoid this using different ETH accounts. FIFO is account specific, at least in Finland.
But you can’t buy on Opensea with USD. So annoying. Bigger question is how do I write off all the worthless NFTs I bought last year?
This is wrong. 2019 IRS guidance states you can use LIFO. So, if you buy ETH and then swap it for an NFT you can be taxed on the latest ETH buy.
My people are telling me that HIFO (highest in, first out) can be accomplished if you take special care to sell the coin you purchased at higher prices. Seems quite tedious to me – Great idea for a software developer to create a product that tracks this and makes it easy.
When you buy NFT the transaction is routed through WETH. So, if you buy new WETH it’s technically a different asset, then you buy the NFT with it and don’t pay taxes on your ETH.
I used the crypto tax trader app to calculate the gains, they counted staking ETH to ETH2.0 as a taxable event. Not sure how is that taxable!
What if you buy new ETH with a broker, you just use to buy your NFTs with and don‘t touch it elsewise?
Precisely, what make crypto debit cards a nightmare that triggers an IRS calling event? But to make it easier, use LIFO for your crypto.
