NFT Tax Loss Harvesting is a practice that most crypto investors and traders struggle to grasp because it is difficult to estimate an NFT’s fair market value. Since the NFT market has also taken a hit in this current bear market, it has become pertinent for NFT investors to familiarize themselves with this practice to help them cut their losses. In this article, we will demystify what NFT tax loss harvesting is and introduce a tool you can use to tax loss harvest with NFTs.
What is NFT Tax Loss Harvesting?
NFT tax loss harvesting is a strategy that involves investors selling their assets at a loss to reduce their tax liability – Capital gains and income tax in this case. By doing this, they incur a capital loss in their investment, which can help reduce their taxable income for the year. For instance, let’s say Paul made a capital gain of $50,000 on his BAYC NFT but also bought some other NFTs for about $30,000, which went down to zero. He could subtract the $30,000 (which happens to be his capital loss) from the capital gain of $50,000, meaning that he would pay less than what he was required to pay initially.
How to Tax Loss Harvest Your NFTs
An investor needs to sell, swap, or dispose of their NFT to use the capital loss to offset their capital gains. However, this trade must be an arm’s length transaction, which both parties willingly agree to partake in without pressure from the other party. Unfortunately, this trade might not be straightforward, especially when the so-called NFTs don’t have any liquidity or value on open markets. If this happens, how does such a person legally dispose of their NFT and realize their capital losses?
The Solution: CoinLedger’s NFT Loss Harvestooor
CoinLedger recently launched an NFT tax loss harvesting tool, The NFT Loss Harvestoor, to solve this problem. The platform buys your illiquid NFTs so you can realize your capital losses and reduce their taxes. Selling your NFT hasn’t been more straightforward; simply connect your wallet, select the NFT you wish you want to sell and receive 0.00000001 ETH in return. The NFT Loss Harvestoor is completely free to use and doesn’t charge any transaction fees when users interact with the smart contract except the gas fee needed to cover the blockchain processing fees.
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