How Are Airdrops Taxed in the USA?
Who doesn't love free money? That's essentially what a crypto airdrop feels like, until tax season arrives. If you received an airdrop in 2025, whether you asked for it or not, the IRS likely considers it taxable income.
This guide breaks down exactly how airdrops are taxed in the US, how to calculate your cost basis and report them.
Key takeaways
Airdrops are taxed as income: You owe ordinary income tax on the fair market value of the tokens the moment you receive them.
Selling triggers a second tax: If you sell the airdropped tokens later, you’ll also pay capital gains tax on any profit.
"Free" isn't tax-free: Even unsolicited or surprise airdrops can create a tax liability if you have control over the assets.
Tracking is manual and risky: Finding the historical price of a token at the exact minute it hit your wallet is nearly impossible manually.
Blockstats automates it: Blockstats automatically detect airdrops, value them at the time of receipt, and generate your tax reports.
What is an airdrop?
An airdrop is when a crypto project distributes free tokens to your wallet. Projects use airdrops to reward early users, promote new tokens, or distribute governance rights. You don't pay for these tokens, they just appear in your wallet.
You might receive an airdrop for:
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Holding a specific cryptocurrency (like the historic UNI or ARB airdrops).
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Interacting with a new protocol or dApp.
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Simply having an active wallet on a specific chain.
While it feels like a gift/reward, the IRS views it differently: they see it as newly created wealth that you must report.
Read next: How to calculate crypto tax in U.S.
Crypto airdrops tax
Airdrops trigger two separate tax events. The first happens when you receive the tokens. The second happens when you sell, trade, or spend them. You need to understand both to file your taxes correctly.
Income Tax
The moment an airdropped token lands in your wallet and you have, it is considered income.
You must report the Fair Market Value (FMV) of the tokens in USD at that exact time. This amount is added to your total annual income and taxed at your regular federal income tax rate (10% to 37%).
Capital Gains Tax
If you hold the tokens and sell them later, you trigger a capital gains tax event. The cost basis is the USD amount you reported as income when you received the airdrop.
Example: Crypto airdrop tax in the USA
Imagine a DeFi protocol airdrops 1,000 governance tokens to your MetaMask wallet on June 1st, 2025.
On June 1st: The token is trading at $2.00.
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Your taxable income is $2,000 (1,000 * $2).
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You report $2,000 as "Other Income" on your tax return.
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You owe income tax on this $2,000, regardless of whether you sell the tokens.
On December 1st: The price rises to $3.00, and you sell all your tokens for $3,000.
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Proceeds: $3,000
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Cost Basis: $2,000 (the amount you already reported as income).
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Capital Gain: $1,000.
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You owe capital gains tax on this $1,000 profit.
Check out: Free crypto profit calculator →
IRS airdrop tax treatment: How does the IRS tax airdrops?
The IRS guidance (Rev. Rul. 2019-24) is clear: airdrops are treated as income.
The critical factor is "dominion and control." If a protocol airdrops tokens to you but they are locked in a smart contract you cannot access, you generally do not owe tax yet. The taxable event occurs the moment you are able to claim or move those tokens.
How are NFT airdrop taxed?
Although the IRS has not provided specific guidance on NFT airdrops, they will probably be treated similarly to other cryptocurrency airdrops. Consequently, you will likely need to report income based on the NFT's value either at the moment of the airdrop or when a market for it is established.
If a project airdrops a free NFT into your wallet, you must determine its fair market value at the time of receipt. This can be difficult for illiquid NFTs, but you can look at the floor price or recent sales of similar assets on marketplaces like OpenSea or Blur.
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Receipt: Report the FMV of the NFT as ordinary income.
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Sale: If you sell the NFT later, calculate capital gains or losses based on that initial FMV.
How can I calculate the cost basis of airdrops?
Your cost basis is simply the Fair Market Value (FMV) of the tokens when you received them.
This sounds simple, but it is a logistical nightmare. You need to know the exact USD price of the token at the specific minute it entered your wallet. If you try to do this manually for dozens of airdrops at the end of the year, you will likely use the wrong price, leading to inaccurate tax filings.
Blockstats solves this by automatically pulling historical price data for the exact timestamp of every airdrop, ensuring your cost basis is audit-proof.
Get started with Blockstats today→
How to report airdrops on your taxes
Reporting airdrops requires two different forms on your tax return.
Where do I report airdrop rewards on my tax return?
You report the initial value of the airdrop on Form 1040, Schedule 1, under the "Other Income" section.
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Line Item: "Other Income"
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Description: "Crypto Airdrop" or similar.
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Amount: The total USD value of all airdrops received during the tax year.
When you sell the airdropped tokens later, those transactions get reported on Form 8949 and Schedule D as capital gains or losses.
This is where you'll use the cost basis you established when you first received the airdrop.
Does airdrop income get taxed twice?
No, you are not taxed on the same dollar twice, but you are taxed on two different activities.
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Activity 1 (Earning): You pay Income Tax on the initial value.
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Activity 2 (Investing): You pay Capital Gains Tax only on the appreciation (growth) of that value after you received it.
What are the common airdrop tax issues
Airdrops introduce complex scenarios that standard tax software like TurboTax often misses.
I received an unexpected airdrops
Technically, if you have control over the tokens, the IRS considers it income. However, if the airdrop is a "spam" token with no liquidity and no real value, the Fair Market Value is likely zero, resulting in $0 taxable income. You typically do not need to report spam tokens with no value, but you should be careful interacting with them.
Price of my airdropped tokens has declined
This is extremely common.
You may owe income tax at a high FMV, even if the token later crashes. However, you can claim a capital loss when selling the token, which helps reduce your tax burden.
Incomplete Data
New tokens often don't have price history on major aggregators like CoinGecko immediately. Determining the FMV for tax purposes becomes a guessing game without specialized software.
I lost my money in an airdrop scam
If you interact with a malicious airdrop and your wallet is drained, this is a harsh reality. Theft losses are generally not tax-deductible for individuals under the current tax code (TCJA).
You cannot deduct the value of the stolen crypto as a theft loss. However, if you purchased a token that turned out to be a rug pull, you might be able to claim a capital loss if you dispose of the worthless asset.
Regulatory Uncertainties
Airdrop tax rules are evolving, but gray areas remain. What about airdrops you can't access immediately? What about tokens with no established market value? What if the project is clearly a scam?
These questions don't have clear answers yet. The safest approach is to report all airdrops conservatively, using reasonable valuations and keeping detailed records in case of an audit.
Calculate airdrop taxes with Blockstats
Manually looking up the historical price for every airdrop you received in 2025 is not just tedious. Blockstats automates the entire process:
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Auto-Detection: It scans your wallet addresses to find every airdrop transaction.
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Precise Valuation: It applies the exact market price at the moment of receipt to establish your cost basis.
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Income Classification: It automatically separates airdrops into "Income" Schedule 1 rather than Capital Gains, preventing reporting errors.
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Tax Form Generation: It produces a ready-to-file report that you can upload directly to TurboTax.
Don't risk an IRS audit by guessing your airdrop values.
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Frequently asked questions
When should I recognize income from an airdrop?
You recognize income when you have dominion and control over the tokens. This typically means when the tokens are deposited in your wallet and you can transfer or sell them. If there's a vesting period or lockup, you don't recognize income until you actually gain control.
Is an airdrop a gift?
No. The IRS does not view airdrops as gifts. Gifts are generally not taxable to the recipient. Airdrops are viewed as newly created income and are fully taxable.
Are free airdrops taxable?
Yes. Even if you paid nothing for them, the IRS views the value of the airdrop as taxable income.
Do you pay tax on airdrops?
Yes. You pay ordinary income tax on the value when received, and capital gains tax on any profit when sold.
Are all airdrops taxable in the US?
Most airdrops are taxable. The only exception would be airdrops you never gain control over or tokens with no value. If you receive tokens you can access and transfer, and those tokens have any market value, they're taxable.