Sold crypto artwork, will pay $ 10 million in tax
In March, a crypto artwork by digital artist Mike Winkelmann, also known as Beeple, went down in history, selling for around $ 70 million. But Winkelmann was shocked to learn that the amount of tax he will pay after this sale is $ 10 million.
Everdays: the first 5000 Days, which attracted attention as the highest-priced digital artwork ever sold, is now being talked about by the amount of tax the aftermarket artist will pay.
Wikelmann's work in more than 5,000 days sold for $ 69 million, making it the highest-priced digital artwork in the world. Wikelmann, however, was unaware of the tax he would pay after this sale. Wikelmann, who was told to pay $ 10 million in taxes, also revealed a lack of information about the taxation of the NFTS.
Because the Revenue Administration considers the trading of NFTs as investment gain, it is subject to capital gain tax. However, because NFTs are considered collectibles, they are taxed at a rate as high as 28%. NFT buyers and sellers also need to be aware of how the cryptocurrency they use to buy NFT will be taxed. Most crypto artwork is purchased using digital currencies. Cryptocurrencies are also subject to a capital gains tax based on how much they have gained since they were originally purchased and how long the buyer has held the digital currency.
If the buyer holds the cryptocurrency for more than a year, it is subject to a long-term capital gains tax. Long-term capital gains are taxed at 15% for those earning between $ 40,000 and $ 441,000 and 20% for those earning more than that amount. Holding the digital asset for less than a year will create a short-term capital gain for the taxpayer based on the effective tax rate.
In this case, NFT buyers and sellers will be taxed on a dollar basis when buying an NFT using one digital currency, selling an NFT for another NFT, selling an NFT for one cryptocurrency, and converting the cryptocurrency used to buy and sell the product back to the United States.
Shehan Chandrasekera, head of tax strategy at CoinTracker, told CNBC that while many people will be surprised at tax time when it comes to the emerging NFT market, most people who work on it probably don't know the heavy tax charge they will face.