Do you have to pay taxes on crypto airdrops?

In the United States, airdrops are subject to taxation, requiring taxpayers to report their fair market value as a form of income. This rule applies regardless of whether the airdropped tokens are subsequently sold or held for investment purposes.

When it comes to the taxation of airdrops, the fair market value of the tokens at the time of receipt is crucial. Taxpayers must determine this value accurately and report it as "other income" on their Form 1040 Schedule 1.

The fair market value of airdropped tokens can be challenging to ascertain, as they may not have a readily available market price. In such cases, taxpayers may need to rely on expert opinions or other valuation methods to determine the appropriate value.

It's important to note that the taxation of airdrops is separate from any subsequent sales of these tokens. If the tokens are later sold, any gains or losses realized will be taxed as capital gains or losses, respectively.

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