What is crypto airdrop?

1 The crypto airdrop is a marketing method employed by startups in the cryptocurrency space. 2 It involves delivering bitcoins or tokens to the wallets of current cryptocurrency traders, either for free or in exchange for a small promotional service. 3 The airdrop is meant to spread awareness and increase ownership of the currency startup.

What are the requirements for receiving crypto airdrops?

The main requirement for receiving crypto airdrops is having a cryptocurrency wallet with a balance. One can't receive or claim an airdrop without having a wallet address. Using an exchange address is convenient but not suitable for airdrops.

How are cryptocurrency airdrops taxed?

Although the IRS has not issued guidance for all types of airdrops, it’s generally accepted among tax professionals that airdropped cryptocurrency rewards should be treated as ordinary income based on fair market value at the time of receipt and taxed based on the individual’s tax bracket.

How much should I set aside for an airdrop?

The amount to be set aside varies depending on your filing status and the tax bracket. If the airdrop is a large amount, it is recommended to talk to a tax adviser and calculate the estimated taxes on the airdrop. Finally, you can entirely eliminate taxes by not claiming the airdrop at all.