NFT Taxes with Billy Loesch

Spotify Podcast Episode: NFT Taxes with Billy Loesch

In episode 18 of Freedom with NFT’s, our guest Billy Loesch shares with us about NFT taxes.

Billy Loesh is a former financial advisor, serial entrepreneur, and NFT collector. He is currently working on a platform called NFTTax.io, whose aim is to make NFT taxes easy to comprehend and help people mitigate them as best as possible.

Listen and get a lot of golden mines from this episode!

[00:00:00] Lauren Turton: Welcome back to Freedom with NFT’s is I’m your host Lauren Turton. And I’m very excited about our guest speaker today. Billy Loesch is a serial entrepreneur and NFT collector, and not only will he be sharing with us about his NFT journey, but he’s going to be going into a very important topic NFT taxes and with tax season upon us this episode is pivotal and key for you to listen to Billy how are you doing today?

[00:00:31] Billy Loesch: I’m doing great. Thank you for having me. Good to see you. How long, when was the NFC NYC, about a month and a half ago or a month ago?

[00:00:39] Lauren Turton: I don’t know, an NFT time, I guess.

[00:00:41] Billy Loesch: It feels like a year ago.

[00:00:42] Lauren Turton: It feels like a year ago and we had been interacting on Twitter before NFT’s NYC. So when we finally were able to see each other in person at the Gary Vee surprise wine party, it was just such a special moment. And we’ve been going back and forth, talking about NFT taxes for a while. So again, this episode going to be very important for our audience. Before we get into that, though, I’m curious to know about what did you do before NFT’s?

[00:01:12] Billy Loesch: Sure. So I knew from an early age, I wanted to be my own boss. You know, entrepreneurship wasn’t as glorified. Not that I’m very old. I’m in my early thirties, but entrepreneurship wasn’t a glorified term 15 years ago. But from a very early age, I knew I wanted to always be my own boss on my own business, build and create..

So as early as elementary school, I can remember selling items, starting a company when I was 16 years old, power washing and doing renovations on homes, small little stuff, painting with a friend of mine. And eventually that led into a career in finance on wall street. I was on wall street for about four years as a financial advisor. From a moral perspective, I wasn’t really jiving with the industry. It was very cut throat and very different business, the glorified one that you saw on TV.

You know people weren’t making money like they used to, and there was a lot of regulations, which is a good thing to protect customers, but it was very difficult to build a career in 2014, 15, 16. So in 2016, I left. And that’s when I started the venture that I’m still doing today, which is Baya bar.

[00:02:28] Lauren Turton: Tell us more about Baya bar.

[00:02:31] Billy Loesch: Yeah. So Baya bar is a smoothie, juice and Acai bowl shop. We focus on Acai bowls and we launched in 2016. So fast forward five years, we’re at 18 locations with about another eight to nine in the works. So we should be at roughly 25 locations in the next month and a half, two months.

[00:02:54] Lauren Turton: That is absolutely incredible. Congratulations to you on success with Baya bar. And so I’m curious to know, when did you find out about NFTs?

[00:03:05] Billy Loesch: Great question. So, because I have the financial background, I stayed very active in the stock market that kind of eventually graduated and parlayed into the crypto world, bitcoin, ethereum. Educating myself on crypto that coupled with my internet relationship with Gary Vaynerchuk, following him for eight, nine years and, you know, watching his videos on Instagram, YouTube, always staying in the loop with what he was doing. When he started talking about NFTs and I naturally was reading about NFTs in my crypto research.

I started to do a little bit more due diligence into them. I obviously found it a little bit confusing, like pretty much everybody who first learns about NFTs. And once I started learning more and more about the technology and the smart contracts behind these NFTs, I started to understand them. And then when Gary is someone who we both are big fans of decided to launch his Veefriends project, I figured what better time to dip my toe in the water in the NFT space. But then, you know, at that time, so I wound up diving into Veefriends, met a lot of great people, got into a lot of other projects and it kinda just spiraled from there.

[00:04:29] Lauren Turton: And so what other projects have you gotten involved in aside from Veefriends?

[00:04:35] Billy Loesch: So I’ve been, and I’m still a holder of Bored Ape Yacht club NFT.

I got into apes pretty early luckily. Gutter Cat Gang. I’m still in gutter cats. So Veefriends, Board Apes, and Gutter Cat Gang are the three well-known ones that I still hold. And that I did well in from an investment standpoint. But I bought into other projects like Mekaverse and some other ones I didn’t do too well.

So I’ve kind of seen both ends of the spectrum.

[00:05:04] Lauren Turton: I appreciate you sharing, being on both ends of the spectrum, because I know a lot of people, when they get into this space, they have shiny object syndrome. They’re hearing about people making so much money. And so I appreciate your authenticity there and sharing that with us.

I’m curious to know with the experience you have as an NFT collector, what do you look for in projects that you’re investing in?

[00:05:29] Billy Loesch: So that’s a great question. And I’m glad you asked that because I think a lot of people need education on this topic. Coming into the NFT space, I was focused around finding art that I liked, you know, whether it was a PFP, a profile picture or Veefriends, which has multiple the same drawn.

I wanted to be involved in projects that one enjoyed the artwork and what it looked like. Two had a team or an artist behind the project that I believed in. So in the case of Veefriends, you know, I’m a huge believer in Gary. In the case of apes. I didn’t know much about the team, but I really liked the artwork.

And I really liked the community that they were building at the time, even when it was early on same thing with gutter cats, great development team, a great community, cool artwork. So, I’ve tried to take that and put it into these newer projects that have launched, you know, first I look at the artwork.

Is this something that I even like to look at? Do I like the team? Do I like the message and the motive behind the project? What do they stand for? What are they looking to do? Being a former financial advisor, constantly buying stocks and different companies. And now being an entrepreneur, you know, when you hear about roadmaps that doesn’t impress me because any business should have a roadmap.

Right? So any new company, any entrepreneurial, new venture should have some sort of roadmap of where they’re going, where they’re starting, where they expect to be short-term goals, long-term goals. So the road map feature of these NFT projects doesn’t really impress me. It’s something that a lot of people get hung up on. You know, what’s the roadmap. Can we see the roadmap? That doesn’t mean that those things are going to come to fruition. That doesn’t mean that the team is going to execute. So I think it’s very important to understand going into a project why you’re investing in it.

And do you feel comfortable losing the money if it doesn’t work out and do you believe in a team long term?

[00:07:38] Lauren Turton: Thank you for that. Those are killer tips in regards to the journey of investing in an NFT project. I want to switch gears now and get onto the topic of NFT taxes. So my first question is how are NFTs taxed?

[00:07:55] Billy Loesch: Good question. So the way that these NFTs are being taxed is in a method that a lot of us don’t agree with. Most NFTs are being purchased in the ethereum. So something that I discovered early on after doing my research was that when you buy an NFT, whatever the price of Ethereum is at the time of purchasing that NFT.

You may have a gain or a loss from your original purchase of that ethereum. So I’ll give an example, if you buy one Ethereum for $2,000 and then you buy an NFT for one ethereum three months later, and the ethereum is trading at $4,000. You have a taxable gain of $2,000 now because it was in less than 12 months time, it’s considered short-term cap gain.

Which is in a higher tax bracket. If it’s past 12 months then it would be long-term cap gain and then it would be in a lower tax bracket. So that raised a huge red flag to me early on. I said, wait a second. I bought ethereum at X, and now I’m buying these NFTs. And now I have to pay taxes on the gap from where I bought the Ethereum to where it was trading at the time of my purchase.

Well, that’s not right. Because I didn’t sell the Ethereum. I’m not liquid. I’m not sitting in cash. So why would I have to pay taxes on this money? Well, it doesn’t matter what I think these are what the rules are. And then the second side of that is now when you sell the NFT. So obviously if you sell the NFT for a gain, there’s going to be taxes there.

And if you sell the NFT for lost, there might be a tax loss or a write-off that you can use, but it all depends on how much a Ethereum you’re selling the NFT for compared to the price of Ethereum at that time. So you might buy an NFT for 10 Ethereum, and let’s say Ethereum is at 3000, so it costs you 30 grand.

And now you sell the NFT for eight Ethereum. So it looks like you took a loss, but Ethereum is now at 4,000, 8 Ethereum times four thousands, 32,000. You actually have a $2,000 gain. So it’s all predicated on the USD value at the time of the sale.

[00:10:19] Lauren Turton: This seems overwhelming. How do I keep track of this?

How does the freedom with NFTs audience keep track? Billy help us.

[00:10:25] Billy Loesch: I’m going to help you. So, you know, taxes, they’re not a sexy topic, right? I hate talking about taxes. No one likes taxes. Unfortunately it is what it is though. Right? So we want to make it as easy as possible for people to understand. So yeah, talking taxes is not sexy and it’s something that none of us enjoy paying or dealing with.

But unfortunately it is the reality that we live in and we have to talk about these things because we don’t want people to be put in a really bad position. So one of the ways that you can help kind of break down and figure out what your taxes are, is by using one of the many softwares that are available.

Now I don’t work for Zenledger. I don’t have a partnership with them. I’m not the creator of Zenledger, but Zenledger is a very useful software that I’ve been using to help break down my taxes. They have a really good team over there. Very responsive team. Zenledger. I can send you the link so you can drop it to your people.

It’s a really great way to import all of your wallets, whether it’s a hot wallet, cold wallet, whether it’s a Coinbase account, you can upload the CSV files and it will compile a tax data for you.

[00:11:46] Lauren Turton: Wow, thank you for sharing that. That’s very helpful. Any other tips that you can share with us on keeping track of our NFT taxes?

[00:11:55] Billy Loesch: I think going forward with a lot of people should do is they should keep a physical ledger, or maybe even on the computer of what they buy and sell and what the price is. You know, these softwares are great. I have a lot of transactions that we’re sifting through now for 2021, and it’s not perfect.

You know, these softwares categorizing some times differently than you do, or I do, whether you’re using lifo, last in first out, fifo or they have another category called hifo, highest in first out. So depending on how you categorize your transactions for the year, will determine your taxes and will also affect what you pay or don’t pay in the future.

So I think keeping the physical ledger is also important.

[00:12:43] Lauren Turton: Thank you for that. And I’m curious to know from the viewpoint of someone who’s getting into NFTs as an artist, They’ve entered the space so they can sell their work. What advice do you have for them in regards to NFT taxes?

[00:12:59] Billy Loesch: So I think the artists, you know, they’re falling into a totally different category.

It’s a little bit more traditional when it comes to the taxes from what I’ve seen now, I haven’t launched a project yet, so I would definitely do your own research to anyone who’s listening to this, but it’s as simple, as far as I know, as launching a project and whatever money you make from that project, that’s your quote of profit for the year.

So I know a lot of artists who are getting in the game or setting up LLCs or different types of corporations, and there writing off their expenses through the corporation, and then they’re taking the proceeds from their project and either distributing it to themselves as pay or reinvesting it into the project as an expense.

So they don’t have to pay taxes on it

[00:13:44] Lauren Turton: Thank you for that. Very, very important as people get into this space, because again, shiny object syndrome. People are seeing either collectors who are flipping and making a lot of money, or they’re seeing artists, who’ve gotten into the space, selling their work, making a lot of money, but we’re not having these conversations at the beginning stages.

So thank you for sharing this information. And I’m curious if I further support or more help with my NFT taxes. Where can I find help?

[00:14:16] Billy Loesch: So like any of those softwares, like Zenledger, they do have services to assist people. I tell everybody number one, I’m not a CPA. And I’m not a financial advisor any longer, so this is not financial advice.

I’m trying to bridge the gap between the tax side of things and the CPA side of things with the NFT communities, because I’m in the NFT communities. So let me take one step back here. One of the problems I’m seeing is you have a lot of CPAs and even lawyers who are trying to break into the NFT space to bring value.

But unfortunately they don’t really understand the NFT space. They’re coming into it with a legal mindset or an accounting mindset. And there’s not a lot of connection with these NFT communities. They don’t understand the psyche behind why we invest, how we invest. Are we flipping? Are we not flipping? So there’s a little bit of a disconnect.

So I’m hoping to bridge that gap. But I always say refer to your local CPA, you know, whoever you use for your taxes now, or your family accountant. These companies like Zenledger, they usually have support teams. So you are able to reach out to them. And I am launching a website and a company called NFTTax.io.

Very straightforward NFTTax.io. Their website is still under construction. We should be launching the landing page in the next week. And what I’m looking to do with NFTTax.io is bridge the gap between the accountants who really understand crypto taxation and NFT taxation, and break it down and make it simple and easy to understand for the NFT community and really emphasize in the sexiest way to possible how important it is to make sure that you are paying these taxes. And you’re not getting caught in six months or in six years from now with a major taxliability.

[00:16:24] Lauren Turton: Wow NFTTax.io. Billy I’m so excited for this venture, and I think it’s amazing that you’re coming from this place of being an NFT community member, having the experience, understanding why we invest, if we’re trading or filling what we’re doing so that you can bridge the gap and I’m just so excited right now. I’m almost at a loss for words. So NFTTax.io, this is something that you’ve been working on behind the scenes for a little bit. It’s coming to fruition. Tell me about what your number one goal is with this venture.

[00:17:06] Billy Loesch: The simple answer is just to help the NFT community in any way possible.

You know, I think number one, we need to help people understand how NFT’s are taxed. That’s at the top of the list. Once they understand how they’re taxed, they can make educated decisions moving forward. Number two, now that they understand how their tax, how can they track it effectively, right.

By using one of these softwares or plugins to keep an eye on their taxes throughout the year. So they can make educated decisions as the year comes to a close. Number three, we want to help the people offset those taxes. So one of the terms that you may hear is tax loss harvesting. Finding ways to write off expenses, finding ways to take losses and other investments to lessen the blow of those taxes.

So, unfortunately we’re at the end of the year here and these moves have to be made before January 1st, but one of the big things that people can do after listening to this podcast is they can do their own research and speak to their local accountant about tax loss harvesting. And I’ll give you an example, cause I like to back up these statements with examples.

I had mentioned the Veefriends and Bored Ape Yacht Club and gutter cats, all projects that I invested in early on and they’ve done well from an investment standpoint and I still hold something like MekaVerse, a project that I do still want. And I do want to be a long-term holder in, but I’m down significantly right now.

And I’m going to get into specifics because I really want to help people. I bought two Meka’s for roughly six ethereum each. Right now the floor is below one Ethereum. Now I’m not taking traits and rarity into account right now, but I wound up buying another one for roughly two and a half ethereum, I think it was when the floor had come down significantly.

So in one of the ways to offset my taxes for the year, I sold one of the Meka’s that I bought for six Ethereum for roughly one ethereum . And I also plan and don’t quote me on this. I know some people might check etherscan. I don’t know the exact prices off hand, but I’m looking to sell all three of them for somewhere between four and 1.5 based on rarity.

Now on the surface, it sounds like I don’t believe in the project, you know, people within the Meka community that I do communicate with like, no don’t sell, don’t, what are you doing. But my intentions are not just to sell and get out of the project. My intentions are to sell, take the tax loss and then invest back into the project.

And this is a very, very key term that people need to do their research on it’s called wash sale in crypto. So also NFT’s, there is a no wash sale rule. And again, not the sexiest topic, but I will explain it briefly. When you sell a stock for a loss, you cannot buy that stock back for a minimum of 30 days.

If you buy it back within that 30 day period, you can’t utilize the rank paid off on your taxes. In crypto, that doesn’t exist. So you literally can buy an NFT or Ethereum or Bitcoin today. It can go down 20% tomorrow. You can click sell, count to 10 and buy it right back. You still own it essentially for the same price.

You’re still invested in it longterm, but you can utilize and capture that 20% write-off that is immensely, immensely important because it can help people really mitigate their tax liabilities. They can still invest into the crypto or the NFC that they believe in. And we don’t know if this rule is going to stay like this going into 2022.

So this might be potentially the last time that we can take advantage of something like that.

[00:21:11] Lauren Turton: Wow, Billy, thank you so much for breaking that down. And I really appreciate you giving these concrete examples. I know that my head is spinning right now I’m learning so much from you. And I appreciate everything that you’ve shared so far on this episode of freedom within NFTS.

Before we wrap this episode up, are there any final thoughts you’d like to leave with our audience?

[00:21:37] Billy Loesch: I think the biggest thing is, again, just to reiterate what I said, you know, taxes, it’s not a fun topic. We all want to support these communities and these amazing artists. And we want to make money and have fun, but it is a reality.

This is not something that should be taken lightly because you may think that you can get away with it now. And maybe some people do skate by and get away with not paying the taxes in the crypt fashion, but you don’t want that to come back and haunt you down the road. So the biggest thing I can tell people is just get educated.

Speak openly to your accountant, check out these different softwares that help you track it. And reach out to the many different CPAs who are helping people in the NFT space. And again with NFTTax.io if anyone fills out the information on the website, you will be hearing either from myself or one of the accountants on our team, and they will help walk you through this and charter, break it down as simply as possible.

[00:22:38] Lauren Turton: Thank you so much, Billy. And how do we find you? What’s your Twitter handle?

[00:22:44] Billy Loesch: My Twitter handle is @billyloesch. And then the name that comes up is billyloesch.eth.

[00:22:50] Lauren Turton: And spell that for us.

[00:22:51] Billy Loesch: Sure. B I L L Y. My last name is L O E S C H.

[00:22:59] Lauren Turton: Thank you so much. This is Lauren Turton with freedom with NFTs.

And as you’ve heard on this episode, your NFT taxes are an important topic for you to get informed and get involved with. I’ll see you on the next one.

Connect with Billy Loesch:

Twitter: http://billyloesch.com/

Website: www.NFTTax.io

Connect with your host, Lauren Turton:

Twitter: https://twitter.com/LaurenTurton_

Instagram: https://www.instagram.com/laurenturton/

Website: https://freedomwithnfts.com/