Buying an NFT with Crypto

Buying an NFT generally involves using a fungible cryptocurrency like ETH. Therefore, the purchase of an NFT constitutes the disposal of your crypto. This means you will be subject to either the long-term or short-term capital gains tax rate, depending on how long you hold the crypto. Thus, if you buy an NFT with an appreciated ETH, you must pay a capital gain. Conversely, if your ETH were depreciated, you would incur a capital loss that you can use to lower your tax liability.