NFT Tax Loss Harvesting in 2026

If you hold an NFT as an investment, selling or swapping it for less than your cost basis creates a capital loss that can offset capital gains from crypto, stocks, or other capital assets. Because NFTs are unique, fair market value can be hard to pin down; recent marketplace sales, floor prices, and appraisals help document it. Burning an NFT isn't a sale. For the basics, see our NFT tax guide and crypto tax loss harvesting guide.

NFTs bought mainly for personal enjoyment, rather than as investments, may be personal-use property, and losses on personal-use property generally aren't deductible.

To claim a loss on an NFT, you must turn the paper loss into a realized loss by formally disposing of the token. That means selling or swapping it to an unrelated buyer and keeping records of the sale.

These steps walk through how to choose a disposal method and apply the resulting loss against your gains:

Ways to realize an NFT loss

• List on a public marketplace like OpenSea or Blur

• Sell to a service that buys unwanted NFTs for a nominal price

Only a sale or exchange of an NFT results in a capital loss. Selling it for cash or stablecoins, or swapping it for another token or NFT, locks in the loss. Giving it away or donating it doesn't create a deductible capital loss, and a gift recipient generally can't use your loss either.

A sale for fair value, even a nominal amount, to an unrelated buyer finalizes your loss, including a sale to a service that buys NFTs for that purpose. A free transfer is a gift and doesn't realize a loss (Treas. Reg. §1.1001-1(e)). Sales to family members or entities you control are related-party sales, and the loss is disallowed (IRC §267). Keep the transaction hash, date, buyer address, price, and fees.

Burning or abandoning an NFT isn't a reliable way to claim a loss. In CCA 202302011, the IRS concluded that cryptocurrency that was still trading at a positive price wasn't worthless and that the taxpayer hadn't shown abandonment. The memo covers cryptocurrency rather than NFTs and isn't binding precedent, but it shows how the IRS is likely to view the question. Even if an abandonment loss were allowed, an individual's loss is a miscellaneous itemized deduction, which the One Big Beautiful Bill Act (P.L. 119-21) permanently disallows for individuals. A sale to an unrelated buyer, even for a nominal amount, generally realizes the loss.

Offset your losses

Offsetting capital gains with losses is, of course, the whole purpose of realizing a loss with a worthless or low-value NFT. Report realized NFT losses on Form 8949 and Schedule D. They first offset capital gains. Up to $3,000 of any excess ($1,500 if married filing separately) reduces ordinary income; any remaining amount carries forward.

A wash sale happens when you sell stock or securities at a loss and buy the same or substantially identical stock or securities within 30 days before or after the sale. Wash sales aren't illegal: the loss is disallowed and added to the basis of the replacement shares (IRC §1091).

Under current law, the wash sale rule generally doesn't apply to NFTs or other crypto that aren't securities, though the IRS could challenge a sale that has no economic substance. Congress has proposed extending it to digital assets, but none of those proposals is law as of October 2026. H.R. 9172, introduced in June 2026, would cover any digital asset other than a qualified US-dollar stablecoin, including NFTs. H.R. 10357, as introduced and advanced by the House Ways and Means Committee on September 16, 2026, applies only to fungible "traded digital assets," so most NFTs wouldn't be affected.

NFTs held 12 months or less sold for profit result in short-term capital gains and are subject to ordinary income tax rates.

Holding for more than a year and selling for a profit results in long-term capital gains and lower tax rates (up to 28% for NFTs treated as collectibles). For more information, see the current tax rates for cryptocurrency.

Capital losses offset gains of the same type first, then the other type. Any remaining net capital loss can reduce ordinary income up to $3,000 this year ($1,500 if married filing separately), and the balance carries forward.

Under Notice 2023-27, until further guidance, the IRS treats an NFT as a collectible if its associated asset or right is a collectible (a look-through test). Long-term gains on collectibles can be taxed at up to 28%. As examples:

Notice 2023-27 isn't a proposed regulation, and as of October 2026, the IRS hasn't issued final collectible rules for NFTs.

Gas fee tax treatment depends on how you paid. Gas and marketplace fees are generally transaction costs: on a cash purchase they add to basis; on a sale or crypto-to-crypto swap, including buying an NFT with ETH, they generally reduce the proceeds of the asset you give up (Treas. Reg. §1.1012-1(h)). ETH spent on gas is a small disposal too, including when you move an NFT between your own wallets.

Some NFTs lose most or all of their value. Low floor prices or no recent sales suggest an NFT has lost most of its value, but that alone isn't a deductible loss.

If an NFT still has a market price above zero on marketplaces such as OpenSea or Blur, it likely isn't worthless in the IRS's view, based on the reasoning in CCA 202302011. To claim a capital loss, you need a sale or swap, reported on Form 8949 and Schedule D.

• Writing off an NFT without selling it generally doesn't allow a deduction, even if it's worthless.

• A sale to an unrelated buyer, even for a nominal amount, generally realizes the loss.

• A nominal-price sale, including to a service that buys NFTs for that purpose, is still a sale. Service fees and gas reduce your proceeds.

• Report the sale on Form 8949 and carry the totals to Schedule D. Losses offset capital gains, then up to $3,000 of ordinary income ($1,500 if married filing separately), with the rest carried forward.

If an NFT was stolen or lost in a scam rather than losing value, see deducting crypto hacks and scams.

Harvesting a loss can reduce tax on capital gains and up to $3,000 of ordinary income ($1,500 if married filing separately); it doesn't reduce income tax beyond that, and any unused loss carries forward (IRS Topic 409). A loss belongs to the tax year in which the sale occurs. See how to report crypto losses.

If you create or mint NFTs, proceeds from selling NFTs you created and the royalties you earn are ordinary income at fair market value when you gain dominion and control. Report them on Schedule C if it's a business, or as other income on Schedule 1 (Form 1040) if it isn't, not as capital gains on Form 8949. Artwork you created isn't a capital asset in your hands, so you can't harvest a capital loss on your own creations.

NFTs received as airdrops or rewards are income at fair market value when you gain dominion and control, and that value becomes your basis. If you later sell one of those NFTs as an investment, the sale goes on Form 8949.

To be prepared for a crypto tax audit, take these simple steps, and when in doubt, speak to one of our crypto tax specialists.

• Save TXID, wallet address, USD value, and date for every disposal.

• Retain marketplace listings and sale confirmations.

• Keep appraisals and charity receipts.

• Keep records for as long as you own the NFT, plus at least three years after filing the return that reports its sale (longer in some cases).

You must report realized losses and gains on Form 8949 even without a Form 1099-DA.

Donating crypto, including an NFT, to a qualified charity doesn't create a capital loss. For an NFT worth less than you paid, the deduction is generally limited to its fair market value. For an appreciated investment NFT held more than a year, the deduction can be its fair market value, depending on the type of charity and deduction limits; some donations are limited to your basis instead. Noncash donations claimed above $5,000 generally need a qualified appraisal and Form 8283. Gifting an NFT to a person doesn't realize a loss either; see are crypto gifts taxable.

Annual gift tax exclusion for NFT gifts

• For 2026, the annual gift tax exclusion is $19,000 per recipient, the same as in 2025 (Rev. Proc. 2025-32, §4.42).

• Married couples can elect gift-splitting to give up to $38,000 per recipient in 2026; both spouses must consent on Form 709.

• Gifts to a spouse who isn't a US citizen have a separate, higher annual exclusion: $194,000 for 2026.

As of October 2026, brokers report digital-asset sales, including NFTs, on Form 1099-DA: gross proceeds for 2025 sales, plus basis for assets bought in a custodial account starting in 2026. For specified NFTs, a broker using the optional aggregate reporting method doesn't have to report a customer's sales if their total proceeds for the year, after transaction costs, are $600 or less. That's a broker reporting rule, not a tax threshold. Self-custody wallets don't issue 1099-DA. No form doesn't mean no tax.

Still pending as of October 2026: the wash sale bills (H.R. 9172 and H.R. 10357), and final IRS guidance on NFTs as collectibles.

Outside the US, rules differ; see our guides for the UK, Canada, and Australia. Canada's superficial loss rule can deny a loss if you rebuy within 30 days before or after the sale (a 61-day window) (more here).

As we've seen, NFT tax loss harvesting can be complicated. But it doesn't need to be difficult during tax season. TokenTax imports transactions from supported marketplaces, wallets, and exchanges, including mints, transfers, royalties, and gas fees, into a single ledger so you can generate Form 8949 for your cryptocurrency to make this and every tax season easy, however complicated your crypto transactions have been. And if you need additional support, our crypto tax professionals are available to help.