Crypto Airdrops Are Taxable Events

IRS issues guidance on cryptocurrency airdrop taxability

Crypto airdrops are taxable events

Income must be reported at market value when received

The Internal Revenue Service today reminded taxpayers that they must again answer a digital asset question and report all cryptocurrency airdrops on their tax returns. Airdrops are considered ordinary income and should be reported at their market value when received.

The IRS has released guidance on airdrop taxes in Revenue Ruling 2022-13. According to the IRS, airdrops are taxable events. This means that taxpayers who receive cryptocurrency from an airdrop must include the fair market value of the cryptocurrency in their income for the year in which it was received.

The basis in the cryptocurrency received from an airdrop is equal to the amount that was included in income. This means that when the cryptocurrency is sold, the taxpayer will have a capital gain or loss equal to the difference between the sale price and the basis.

Taxpayers who have received cryptocurrency from an airdrop should report the income on their tax return using Form 8949, Sales and Other Dispositions of Capital Assets. The airdrop should be reported in Part I of the form, under the heading "Other." The taxpayer should enter the fair market value of the cryptocurrency in column (d), the date the cryptocurrency was received in column (e), and the code "A" in column (f).