Short answer: coins you receive from an airdrop are ordinary income at their fair market value on the day you can control them. That value becomes your cost basis. When you later sell or trade the coins, you report a capital gain or loss from that basis. A hard fork or soft fork that gives you no new coins is not income.
What the IRS sources say
- IRS virtual currency FAQ 22: a hard fork with no new cryptocurrency received is not taxable income.
- FAQ 23: a hard fork followed by an airdrop where you receive new cryptocurrency is taxable income in the year you receive it.
- FAQ 24: the income is ordinary income equal to the fair market value when the airdrop is recorded on the ledger, provided you have dominion and control over the coins.
- FAQ 25 and Rev. Rul. 2019-24: your basis equals the amount you included in income.
- FAQ 29: your holding period begins the day after you receive the coins.
- FAQ 30: a soft fork does not create new cryptocurrency, so it is not income.
The IRS notes these FAQs generally apply to transactions completed before Jan. 1, 2025. The same principles in Notice 2014-21 and Rev. Rul. 2019-24 still underlie current guidance on the IRS digital assets page.
How to value airdropped coins
If an exchange handled the airdrop, use the US dollar value the exchange recorded (FAQ 26). Otherwise use the value at the date and time the transaction was recorded on the blockchain; the IRS accepts a value from a blockchain explorer that tracks worldwide indices (FAQ 27). If the token has no published value at all, FAQ 28 covers how fair market value is set. Keep screenshots or exports of the value you used, since FAQ 46 requires records that support your return.
Where to report
- Report the airdrop income as other income on Schedule 1 of Form 1040 (FAQ 44).
- Answer Yes to the Form 1040 digital asset question, since you received digital assets.
- When you later sell or swap the coins, report the sale on Form 8949 and Schedule D, using the income amount as your basis. Short-term or long-term depends on whether you held it more than a year from the day after receipt.
- If the token became worthless or you sold below basis, see deducting crypto losses.
Airdrops are easy to miss because no broker sends a form for them, and a Form 1099-DA may show a later sale with no basis. FAQ 42 says you must report income from all taxable crypto transactions even without an information return.
Software pulls wallet history, flags airdrops and assigns values for you. CoinLedger (code CRYPTOTAX10 for 10% off) and Koinly both tag airdrop income. Affiliate links; disclosure.
Large airdrops, many tokens, or missed years? A DeFi crypto tax CPA can sort out valuation and amend prior returns. General information, not tax advice.
FAQ
Are crypto airdrops taxable?
Generally yes. IRS FAQ 23 says that if a hard fork is followed by an airdrop and you receive new cryptocurrency, you have taxable income in the year you receive it. Rev. Rul. 2019-24 treats it as ordinary income.
When do I count airdropped crypto as received?
When you have dominion and control over it, meaning you can transfer, sell, exchange or otherwise dispose of it. That is generally the date and time the airdrop is recorded on the blockchain (IRS FAQ 24 and 25).
Is a hard fork taxable if I got no new coins?
No. IRS FAQ 22 says that if your crypto went through a hard fork but you did not receive any new cryptocurrency, you don't have taxable income. A soft fork is also not income (FAQ 30).
What is my cost basis in airdropped coins?
Your basis equals the amount you included in income, which is the fair market value when you received the coins (IRS FAQ 25). When you later sell, the gain or loss is measured from that basis.