Cryptocurrency, NFTs and the metaverse are likely going to be unavoidable as tax professionals navigate each tax season. Now’s the time to learn how the IRS treats digital assets, including the requirements for reporting income received from selling, trading and exchanging them for other products and services.

Below, you’ll find a few of the top questions from a recent webinar on the topic and their accompanying answers. If you choose to attend the on-demand version of this webinar, you’ll have access to the full recording and the entire list of Q&As.   

Q: Do wash sale rules apply to digital asset transactions?
A: The current guidance is no; the wash sale rules do not apply. However, there is pending legislation that expands wash sale treatment to include digital asset transactions.

Q: If you buy a cup of coffee with virtual currency, would this be considered a taxable transaction?
A: You could have a taxable transaction depending on the basis in the virtual currency. You are exchanging property for coffee and would pay taxes on the gain for the virtual currency sold to buy the coffee.

Q: Is there a report that will show if the taxpayer received a fork or an airdrop?
A: The client would have to look at their wallet to determine if an airdrop or hard fork was received by the taxpayer.

Q: Is Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business, filed at receipt of cash or with the tax return?
A: File Form 8300 by the 15th day after the date the cash was received. If that date falls on a Saturday, Sunday or legal holiday, file the form on the next business day. It is separate from the tax return. 

To learn more about the tax implications of digital assets and cryptocurrency, you can watch our on-demand webinar. NATP members can attend for free, depending on membership level! If you’re not an NATP member and want to learn more, join our completely free 30-day trial at natptax.com/explore.   

Question: I’m finding conflicting information regarding federal tax credits for two- and three-wheeled vehicles on the internet. Can I claim the federal tax credit for a two-wheeled vehicle acquired in 2022 or not?

Answer: No. The federal tax credit provided for in §30D(g) for two- or three-wheeled plug in electric drive vehicles expired at the end of 2021 and was not extended. However, if you acquired the two-wheeled vehicle in 2021, but placed it in service during 2022, you may still be able to claim the credit for 2022.

The credit is 10% of the cost of any qualified two-wheeled plug-in electric vehicle placed in service by the taxpayer during the taxable year; it cannot exceed $2,500. As an aside, e-bikes, for example, generally achieve a speed of no more than 28 MPH and, therefore, would not have met the definitions for the credits outlined.

The Tax Code provides a number of provisions designed to help individuals and families pay for college, including education credits like the American opportunity tax credit (AOTC) and the lifetime learning credit (LLC) that help reduce the tax owed by individuals.

With the rising cost of college and higher education, it’s important to know all the higher education tax benefits available.

Below, you’ll find a few of the top questions from a recent webinar on the topic and their accompanying answers. If you choose to attend the on-demand version of this webinar, you’ll have access to the full recording and the entire list of Q&As.  

Q: If Form 8332, Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent, is used, does the custodial parent or the parent claiming the child get the American opportunity tax credit (AOTC)?
A: The parent claiming the child as a dependent gets the AOTC.

Q: If grandparents started a 529 plan and used it to pay the grandchild’s college expenses, how is this handled on their tax return considering the grandchild isn’t a dependent?
A: The 529 plan distribution is nontaxable if it was used for qualified education expenses of the designated beneficiary (grandchild), even if the grandparents don’t claim the grandchild as a dependent. When the entire distribution is nontaxable, the grandparents don’t report anything on their tax return.

Q: If the taxpayer only signs up for one course at an eligible college, do they still qualify for the lifetime learning credit?
A: Yes. The lifetime learning credit is available for one or more courses.

Q: Does beauty salon school qualify as a vocational school?
A: Yes, if the school is eligible to participate in federal financial aid programs, it qualifies.

To learn more about helping clients plan for higher education, you can watch our on-demand webinar. NATP members can attend for free, depending on membership level! If you’re not an NATP member and want to learn more, join our completely free 30-day trial at natptax.com/explore.