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How Taxes Work With Lofty
More Information on 1099 Tax Forms
More Information on 1099 Tax Forms

View detailed information on 1099 tax forms

Max Ball avatar
Written by Max Ball
Updated over a week ago

Who receives a 1099 Form?

Any person, whether U.S. or international, that has purchased tokens in properties and have earned at least $0.01 of income through their ownership will receive a 1099 form through the Lofty app dashboard.

We will send out an email notification to all investors who have received a form as well to inform them how to access the form(s).

This process is the same for both U.S users as well as international users of Lofty.

You will still receive a 1099 form even if you have sold all of your tokens, withdrawn your rental income, and have requested to delete your account and personal data, if you have incurred any earnings during that tax year.

Tax years are treated as a standard year, which means it starts on January 01 and ends on December 31.

This means if you only joined the marketplace in 2022 for example, you will not receive any tax documents until 2023.

Do I have to fill out my own 1099 forms?

No. All the income, expenses, and depreciation have been pre-filled in according to your pro-rata ownership in the holding entity for each property you own.

As a result, the form is ready to file as soon as you receive it.

However, if you stake USDC into any of the liquidity pools on the platform without having a KYCed Lofty account, you will be responsible to track your own transactions and earnings. Lofty does not have your personal information to fill out and deliver a form to you.

What rates are my earnings taxed at?

Assuming you are a U.S person or a foreign person not subject to tax-withholding, rental income earned is taxed at the nominal income rate.

Realized gains on token prices, if you've sold your tokens for a profit, are taxed at the capital gains rate depending on your holding period. If you held the tokens for less than 1 year, the gains would be taxed as short-term capital gains. If you’ve held your tokens for more than 1 year, the gains would be taxed as long-term capital gains.

Staking income will be taxed at the nominal income rate. Any gains or losses from staking will be taxed at the same capital gains rate depending on the duration of your staking period.

Why do I have negative or zero income on my 1099 form?

Depending on the expenses, E.g., repairs made on your property via the maintenance reserve, income lost due to delinquent tenants, and depreciation benefits, you might have $0 or even negative earnings on your 1099 form.

If you have $0 in earnings, you technically do not need to file taxes for these holdings, which can save you a significant amount of money and time with your accountant.

However, if you have negative earnings, then it would be beneficial for you to file the forms.

This is because negative earnings on paper can offset your other tax liabilities.

If you owe $100 in taxes from other investments, but your own paper loss for your property holdings were -$100, you can actually use that paper loss to negate your other gain.

Before you decide on anything, we highly recommend you consult your own tax professional as each person may have their own unique tax situation.

How many 1099 forms will I receive?

You will receive a single 1099 form for all of your investing activity combined.

How do I file my 1099 forms?

You can self file the forms through services like TurboTax.

If you have a CPA that handles all your taxes, you can simply send them the form and they will handle the rest. But some CPAs may charge an additional rate for each additional 1099 form.

For US persons for federal taxes only

In general, you would simply lift your on paper earnings reported by the 1099 form. Then, fill in the final number into your personal 1040 returns in the additional income section.

Next, attach your 1099 forms to your 1040 returns and send the entire return to the IRS.

Do I have to file for state returns?

Some states require you to send them a copy of the 1099 forms you filed with the IRS. Other states don't require you to send a copy because they participate in the Combined Federal/State Filing Program (CF/SF). The CF/SF Program was created to simplify information returns filing.

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