Airdrop and Hard Fork Taxes

Free crypto is rarely free from a tax standpoint — the IRS generally treats airdrops and coins received from a hard fork as ordinary income in the year you receive them.

Under Revenue Ruling 2023-14 and earlier IRS guidance, the fair market value of the new coins at the time you receive them (or have the ability to access them) is included in your taxable income.

For a hard fork, if a new coin is created and deposited into your wallet, you have income; if the fork happened but you had no way to access or sell the new coins yet, the income recognition can be deferred until you do.

Airdrops work similarly — once the tokens hit your wallet and you have dominion and control over them, that's the moment of income regardless of whether you wanted the tokens or even know they're there.

The value you report as income becomes your basis, so future sales are only taxed on gains above that — track each airdrop carefully because they're one of the areas the IRS has specifically flagged for scrutiny.