A long-term gain you expect to be taxed at 0, 15, or 20 percent can instead be pulled into the 28 percent collectibles rate, and the trap reaches certain NFTs, not just coins, art, and metals. This free guide helps you spot when the collectibles rule applies before you report the sale.
What this free guide covers
- How the 28 percent rate actually works: IRC section 1(h)(5) and 1(h)(4) remove collectible gain from the usual 0 / 15 / 20 percent long-term bands.
- What counts as a collectible under IRC section 408(m), and how Notice 2023-27 applies a look-through test to decide when an NFT is treated as a collectible.
- A checklist for spotting when a long-term gain may be taxed under the collectibles rule instead of the normal capital-gain bands.
- A worked example and a quick-reference data table, with the reporting touchpoints on Form 8949.
Who it is for
Taxpayers who sold or flipped physical collectibles or NFTs, and tax preparers who want a clean way to document why an asset was or was not treated as a collectible.
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This guide is for information only. It is not legal or tax advice, it does not create a client relationship, and no specific outcome is guaranteed.
Not sure how an asset should be classified?
Noah Green, CPA, CFE, works with digital asset and collectibles taxpayers to classify gains, document positions, and report them correctly. Use the Sheepdog Tax contact form to reach out.
Prepared by Noah Green, CPA, CFE