Are crypto airdrops taxable?

Crypto airdrop tax rules depend on where you live and why you received the tokens. In the US, airdropped coins are generally taxable income in the year you can control them. If you are new to the idea, start with what is a crypto airdrop.

Is an airdrop taxable income for the IRS?

Generally yes. The IRS set out its view in Revenue Ruling 2019-24, issued in October 2019. The ruling looked at two cases. If a hard fork creates a new coin but you never receive any, you have no income. If new coins are airdropped to you after a hard fork, you have ordinary income.

Timing depends on control. The income is counted when you can exercise what the IRS calls dominion and control, meaning you can transfer, sell or otherwise use the tokens. The amount is the US dollar fair market value at that point. The ruling only covers airdrops that follow a hard fork. For other giveaways, the IRS's broader position is that digital assets received as a reward, award or payment are income, which is why its Form 1040 question asks about them.

What is the cost basis of an airdropped token?

In the IRS view, your basis in coins received from a hard fork equals the amount you included in income. When you later sell, swap or spend the tokens, you compare the sale value with that basis to find a capital gain or loss. Holding them for more than a year before selling makes the gain long-term. Our guide on how crypto is taxed in the US covers the capital gains side.

How are airdrops taxed in the UK and Australia?

In the UK, HMRC says airdrops given in return for a service, or in expectation of one, are taxed as miscellaneous income or as part of an existing trade. Income Tax may not apply if you received the tokens without doing anything in return and not as part of a trade. Either way, disposing of the tokens later can create a chargeable gain for Capital Gains Tax. See how crypto is taxed in the UK for the wider rules.

In Australia, the ATO says established tokens received through an airdrop are reported as other income at their Australian dollar value. See how crypto is taxed in Australia.

How do you report an airdrop on your taxes?

On a US return, ordinary income from forks, staking and mining is generally reported on Schedule 1 of Form 1040. You also answer yes to the digital asset question on Form 1040 if you received crypto from a hard-fork airdrop. When you later sell the tokens, the gain or loss goes on Form 8949 and Schedule D. You still have to report it even if no exchange sends you a tax form.

Rules differ by country and change often. Check the tax authority or a qualified professional for your own situation.