See what an NFT sale really costs in federal tax — the 28% collectible ceiling for long-held tokens, ordinary rates for flips, and how your other income decides which one applies.
| Scenario | Proceeds | Basis | Gain | Effective Rate | Tax | After Tax |
|---|---|---|---|---|---|---|
| Short-term flip (held 6 mo) | $9,000 | $4,000 | $4,500 | 12.0% | $540 | $3,960 |
| Small long-term gain | $20,000 | $10,000 | $10,000 | 12.0% | $1,200 | $8,800 |
| Mid gain, $80,000 income | $50,000 | $10,000 | $40,000 | 22.1% | $8,833 | $31,167 |
| High earner, $200,000 income | $100,000 | $10,000 | $90,000 | 28.0% | $25,200 | $64,800 |
| Large sale, $150,000 income | $300,000 | $50,000 | $250,000 | 28.0% | $70,000 | $180,000 |
All rows are Single filers with the $15,000 standard deduction. Three things to notice. At low income the collectible gain can still fall partly in the 10% or 12% bracket, so the effective rate is well under 28% — the 28% figure is a ceiling, not a flat rate. Once ordinary income alone pushes you into the 24% bracket, every additional dollar of collectible gain costs exactly 28%. And the short-term flip at $4,500 is taxed as ordinary income at 12%, which happens to be cheaper than the long-term rate would be — the one-year rule does not always help when your ordinary brackets are low.
Under IRC 408(m) a collectible includes any work of art, rug, antique, metal, gem, stamp, coin, or alcoholic beverage. IRS Notice 2023-27 treats NFTs as collectibles where the associated right or asset looks like one of those categories. In practice most profile-picture and generative-art NFTs have been treated as collectibles, while some purely utility tokens may not be. The distinction matters a lot: a stock held more than a year is taxed at 0%, 15% or 20%, whereas a collectible is capped at 28%.
The 28% figure is a maximum, applied like a separate rate bracket. Your collectible gain is stacked on top of your ordinary taxable income, and each slice pays the lower of 28% and the ordinary rate for that bracket. A taxpayer in the 12% bracket therefore pays 12% on their collectible gain, not 28%. Only when the gain reaches income that would otherwise be taxed at 24% or higher does the full 28% bite — and 28% then applies to everything above that point.
| Holding Period | Rate Applied | Compared with a stock |
|---|---|---|
| 12 months or less | Ordinary income, up to 37% | Same as short-term stock gain |
| More than 12 months | 28% ceiling, stacked | Worse - stock maxes at 20% |
| Loss in either period | $3,000 ordinary offset per year | Same rules as securities |
| Gain sold at a loss then repurchased | Wash sale rules apply | Same as securities since 2022 guidance |
What does not count: the cost of a hardware wallet, subscription tools, or the electricity to run a node. Those may be deductible business expenses if you are a professional trader, but they are not part of the NFT's basis.
Since 2025, brokers report digital asset proceeds on Form 1099-DA, but most NFT marketplaces were not reporting basis, so the form often shows proceeds with a zero or blank basis. Filing without reconstructing your basis overstates your gain and overpays tax. Keep the original mint transaction hash and the USD value at that moment — that record is the only thing that defends your basis in an audit.
NFT investors routinely assume a long-held token gets the same favourable treatment as a long-held stock. It does not. Because NFTs are classified as collectibles, a gain held more than a year is capped at 28% instead of the 20% maximum that applies to securities. On a $250,000 gain that difference is $20,000 of extra tax — and unlike the 0/15/20% stock rates, there is no way to plan around the 28% ceiling once your ordinary income is already in the 24% bracket.
The 28% figure is a ceiling applied slice by slice on top of your ordinary income. If you earn $80,000 and clear a $40,000 gain, only the top part of that gain sits in income that would otherwise be taxed at 24% or more; the earlier slices are taxed at 22% or below. That is why the mid-gain example shows 22.1% rather than 28%. The higher your other income, the closer the effective rate gets to a flat 28% — the high earner example hits it exactly.
Total up every cost that went into acquiring the token: mint price, gas, the marketplace fee, and any royalty paid on an earlier transfer. Then check the holding date against the acquisition date to the day. Selling at 11 months instead of 13 turns a 28% gain into ordinary income at your marginal rate, which is worse if you are in the 24% bracket or above and better if you are in the 12% bracket. If you have realised losses elsewhere, harvest them in the same year — NFT losses offset NFT and stock gains without limit.
⚠️ Important: Uses 2025 federal ordinary and capital gain brackets with the standard deduction, and treats the NFT as a collectible under IRC 408(m) as described in IRS Notice 2023-27. It excludes state tax, the 3.8% net investment income tax, wash sale adjustments and any professional-trader treatment. NFT classification is fact-specific; confirm with a tax professional before filing.