The Year-End Tax Planning Guide for the NFT Creator
A step-by-step manual to help NFT artists understand taxes and discover strategies to lower their tax liability
Many independent artists may have released their initial non-fungible token (NFT) this year, imitating the major brands of today. Because cryptocurrency earnings differ from typical corporate cash flow, the tax filing procedure will be unique for artists who are domiciled in the United States.
“Creators must be thinking about taxes,” said Justin Macari, a CPA with a New York City base and a well-known Zen Ledger tax expert.
But given the explosive growth of NFTs since late 2021, it’s possible that artists who recently switched to selling digital goods did so without fully contemplating the consequences of taxes.
not claiming NFT income. This year, a lot of artists experimented with NFTs, and anyone who made money from NFT sales could claim that income on their taxes. However, amateurs are taxed differently by the Internal Revenue Service than individuals who make a career from their art.
Work with your accountant to finish the “material participation” test checklist. This list of requirements aids company owners in determining which of their income-producing activities will be subject to self-employment taxation at the maximum rate and which areas of their operation will be eligible for any applicable deductions or credits.
500 hours are what the IRS defines as “material engagement,” according to Macari. Start preparing to claim your NFT sales earnings as self-employment income if, by the end of 2022, you will have spent 500 hours or more creating NFT artwork—roughly nine to ten hours per week.
Read More:- The Year-End Tax Planning Guide for the NFT Creator