Airdrops are among the most common first tax problems in crypto, because people receive tokens they never paid for and often do not know they owe something.
Income at receipt
In the US, an airdrop is ordinary income at fair market value on the date you can control the tokens. Not when you sell them — at receipt. The value on that day is added to your taxable income for the year, and it simultaneously becomes your cost basis.
That second point is the useful part. Receiving $500 of tokens is $500 of income, and it gives you a $500 basis. Selling later at $200 is a $300 capital loss. So the tax is not $500 plus a separate gain on the sale; it is $500 of income then the gain or loss from that basis.
The missing basis problem
The IRS has required basis information for airdrops since 2017. In practice many people never record the value at receipt, and years later the exchange that sent the token has no record either.
This creates a real dilemma. Without a basis you face two bad options: omit the airdrop and understate income, or reconstruct the value from the price on the distribution date and record it. Reconstruction is usually the right answer. Historical price data exists for most tokens, and an estimate with a documented method is far better than a missing entry.
This is the single strongest practical argument for using software that imports airdrop history and applies the receipt-date price automatically. Doing it manually across dozens of drops means finding historical prices for each one.
Not all airdrops are taxable income
Several categories are treated differently, and misclassifying them is expensive:
- Hard forks — generally not taxable at receipt in the US if you had no control beforehand, but you get a basis equal to fair market value and a holding period starting at the fork.
- Unsolicited promotional tokens — the IRS position has shifted. A genuine unsolicited airdrop with no arrangement is not income at receipt, but airdrops arranged in exchange for your tokens, or requiring you to promote a project, generally are.
- Layer 2 distributions — treatment follows the same control test.
The distinction that matters is whether you had to do anything, and specifically whether you had to promote or spend to receive it. If receiving the token required publicising the project, that looks like a payment for services.
Fees and your share
Where you paid a gas fee or an exchange withdrawal fee to claim an airdrop, that cost can reduce the amount you received and so reduce your income. Some airdrops are also claimed through a marketplace where the cost includes a service fee. Those deductions are legitimate but need documenting at the time.
The UK position
HMRC treats most airdrops as property received by gift. Where the tokens are received with no disposal obligation and no right to expect them, receipt is generally not a taxable event — but you still acquire a basis, and the gain crystallises when you sell. Receiving tokens in exchange for promoting a project is different again and likely closer to income.
How to report this properly
- Identify every airdrop you received, including ones from projects you have never heard of.
- Establish the value at the date you had control, using exchange records where possible.
- Classify each one — genuine airdrop, hard fork, or promotional payment.
- Record the basis and, in the US, the income.
- Report the income for the year you received it, not the year you sold.
Step 2 is where spreadsheets fail. Automated importers pull the receipt date and price directly from transaction history rather than requiring you to research it. For a portfolio with a long tail of small airdrops, that difference is the whole job.
This is general information, not tax advice. Airdrop treatment varies significantly by circumstance and jurisdiction — confirm your position with a qualified tax professional.