The market for NFTs nowadays is mostly driven by collectibles like digital art, sports cards, and rarities.
Owning some of this cryptocurrency—and keeping it in a digital wallet—is often the first step, as many NFTs can only be bought using Ether. The next step is buying NFTs from online NFT marketplaces, such as OpenSea, Rarible, or SuperRare.
In this blog, we’ll take a look at how NFTs are taxed and how you can do your OpenSea taxes.
How is NFT Taxed?
NFTs are taxed similarly to other crypto-assets since they are regarded as property.
When using a cryptocurrency like Ethereum to purchase an NFT, you may see capital gains or losses depending on how much the value of your disposed cryptocurrency had changed when you first got it.
Depending on how much the price of your NFT had changed when you first obtained it, you may make capital gains or losses when you sell it.
If you issue an NFT, you must declare primary and secondary sales revenue as regular income.
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OpenSea & OpenSeaTaxes
OpenSea, one of the largest decentralized NFT markets, has been operating since 2018.
The capability of self-listing is the primary objective of OpenSea. Without paying a commission or platform charge, artists may establish a market for their NFTs.
By simply entering data sets like names, categories, immutable, and changeable data, artists may design their NFTs. After the NFT is created, its ownership is allocated, allowing artists to sell or transfer it immediately.
However, as mentioned earlier, NFTs are taxable. So your next question would probably be about how to deal with OpenSea taxes.
Why Won’t OpenSea Provide You with Tax Forms?
Any NFT marketplace struggles to produce full tax records because of the complexity of NFT taxes.
Consider using Ethereum to purchase an NFT on OpenSea. The cost at which you initially bought your ETH will determine how much financial gains you will experience. Unfortunately, NFT markets like OpenSea lack access to this data and hence are unable to assist you in determining your capital gains.
Thankfully, there is a different method to manage your OpenSea taxes: using cryptocurrency tax software.
Does OpenSea Report Taxes to the IRS?
According to OpenSea’s privacy policy, the firm has the right to reveal user information to comply with applicable laws. Additionally, due to the approval of the U.S. infrastructure bill, OpenSea will probably need to start reporting transaction data to the IRS soon.
Filing OpenSea Taxes
Your OpenSea tax reporting procedure may be made easier using three simple steps on the cryptocurrency tax software of your choice. For filing your OpenSea taxes, all you need is your Ethereum address.
- Click “Import” on the crypto tax software of your choice, and choose “Ethereum Wallet.”
- Copy and paste the address from your wallet.
- You will be able to view every purchase and sale you made using that particular wallet, including any transactions made on OpenSea.
That’s all, then!
You’ll be able to produce a tax report with a single click once you’ve integrated all of your cryptocurrency transactions for the year through OpenSea.
Finally, Should You Consider OpenSea?
Attacks on NFTs and crypto are probably going to keep happening. You must keep a watchful check on your valuables in exchange for giving up a bank and keeping a set of keys for yourself.
As a result, OpenSea offers a platform for trading NFTs but is unable to maintain them entirely secure without owner attention. The best approach to protect your asset is to have a hardware wallet that holds your NFTs.
FAQs
- Do you pay taxes on OpenSea?
Yes, taxes must be paid on benefits received through OpenSea. The rates are standard according to your income bracket and might range from 10% to 37%.
2. Does OpenSea report to the IRS?
According to OpenSea’s privacy policy, the firm has the right to reveal user information to comply with applicable laws. Additionally, due to the approval of the U.S. infrastructure bill, OpenSea will probably need to start reporting transaction data to the IRS soon.
3. Is OpenSea safe?
Attacks on NFTs and crypto are probably going to keep happening. OpenSea offers a platform for trading NFTs. But the best approach to protect your asset is to have a hardware wallet that holds your NFT.
4. How is NFT Taxed?
NFTs are taxed in the same way as other crypto-assets since they are regarded as property. When using a cryptocurrency like Ethereum to purchase an NFT, you may see capital gains or losses depending on how much the value of your disposed cryptocurrency had changed when you first got it.
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