Individuals in the United States who planned on padding their retirement accounts with JPEGs may want to reconsider, following an announcement today from the Internal Revenue Service (IRS) that it may preclude NFTs from IRAs.

The IRS and U.S. Treasury Department announced that they plan to issue guidance that could cause NFTs to be treated similarly to physical collectibles like art, coins, antiques, and alcohol, which retirement savers cannot add to their accounts.

Additionally, classifying NFTs as collectibles could impact how they’re taxed when swapped or sold on secondary markets. Depending on a person’s income, short-term capital gains tax—which NFTs are subject to—ranges from 10% to 37%. But capital gains on collectibles is capped at 28%.

“It appears that the IRS is intending to classify NFTs as digital receipts—which is essentially what they are,” Timothy Cradle, Director of Regulatory Affairs at Blockchain Intelligence Group, told Decrypt. “That means in a scenario where one has an NFT JPEG, then the JPEG is the collectible for the purpose of taxation and not the NFT itself.”

As part of its process for issuing new guidance, the IRS and Treasury Department requested comments on the proposed changes, allowing people to respond to questions such as, “What burdens does the analysis impose?” and “What factors might be considered to determine whether a digital file constitutes a ‘work of art?’”

The agencies said that they will accept comments that will be made public unti

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Author: André Beganski

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