Are Crypto Forks & Airdrops Taxable in 2025? — IRS “Dominion & Control” Rules (Updated: Jan 2026)
“I didn’t sell anything — why would the IRS tax my fork or airdrop?”
This is one of the most common questions taxpayers face when filing U.S. taxes for the 2025 tax year (filed in early 2026).
The short answer: if you gain control of new crypto, the IRS treats it as taxable income right away.
2025 compliance alert (Form 1099-DA):
Starting with transactions on or after Jan 1, 2025, many brokers/exchanges may report your digital asset proceeds on Form 1099-DA.
Even if you don’t receive a form, you’re still responsible for reporting your crypto income, gains, and losses accurately.
📖 Table of Contents
1️⃣ Forks 101: Hard vs. Soft (What creates new taxable crypto?)
A fork happens when a blockchain protocol changes. Some forks create new tokens, while others do not.
For tax purposes, the key question is simple: did you receive a new digital asset?
- Hard fork: can create a new blockchain and a new token (potential taxable income)
- Soft fork: updates the existing blockchain without issuing new tokens (generally not taxable)
Tax rule in one line:
No new tokens = usually no income. New tokens + you can control them = likely taxable income.
2️⃣ When a Fork Becomes Taxable: “Dominion & Control”
The IRS focuses on when you gain dominion and control over the new tokens —
meaning you can actually access them and have the ability to transfer, sell, or trade.
- You can access the new coins in your wallet/account
- You can transfer/sell/trade them (not just “they exist on chain”)
Exchange users (important reality check):
Holding crypto on a centralized exchange? Then even if a hard fork happens,
your taxable “income date” is often the day the exchange enables trading or withdrawals for the forked asset.
If the exchange doesn’t support the forked coin yet, you may not have “control” yet.
Once you have control, you report income based on the fair market value at that time.
Example:
You receive 2 new coins from a fork at $12 each → $24 of ordinary income.
3️⃣ Why Airdrops Get Taxed Immediately
Airdrops can feel “random,” but the IRS typically treats them as ordinary income once they hit your wallet and you can control them.
Airdrops commonly become taxable when:
- Tokens are deposited to your wallet/account and you can access them
- You manually claim an airdrop (signature/claim action)
- You earn tokens via promotions, referrals, or tasks
Hard truth:
If the token crashes after receipt, that price drop usually does not erase the original income tax. (You may need a separate strategy to manage the loss — see Section 5.)
4️⃣ Cost Basis (2025 wallet-by-wallet tracking)
Once forked or airdropped tokens are included in income, that income value becomes your cost basis.
Later, when you sell or swap, you calculate capital gain/loss using:
Capital Gain = Sale Price – Income Basis
- Price goes up → capital gain
- Price goes down → capital loss
2025 basis tracking upgrade (wallet-by-wallet):
If you use multiple wallets or multiple exchanges, don’t treat everything as one big pool.
From 2025 forward, keeping records by wallet / by account becomes much more important — especially if your broker reports proceeds on Form 1099-DA and your records don’t match.
5️⃣ Practical Examples + Tax Loss Harvesting Tip
BTC → BCH (classic fork example)
- You held BTC during the fork
- Once you can access BCH, it’s worth $300 total
→ Report $300 of ordinary income (at the time you gained control).
Airdrop example
- 50 tokens received at $0.80 each
→ Ordinary income = $40
Later sale example
- Basis (income value): $40
- Later sale: $95
→ Capital gain = $55
EA practical tip: Tax Loss Harvesting
“My airdrop crashed — I don’t even have cash to pay the tax.” This happens a lot.
If you later sell the token at a loss, that loss may help offset other capital gains (and potentially up to a limited amount of ordinary income, depending on your overall return).
The key is: a loss usually requires a real disposition (sale/swap), not just “it went down.”
6️⃣ Where to Report Fork/Airdrop Income (Tax Forms)
For most individual taxpayers, fork or airdrop income is reported as ordinary income.
In many common situations, it’s reported on Form 1040 → Schedule 1 (“Other income”).
Do not rely only on what forms you receive:
Form 1099-DA may report proceeds from dispositions, but forks/airdrops can create income even without a form.
Your job is to keep a clean record of: (1) receipt date/time, (2) FMV, (3) wallet/account, (4) later sale/swap.
❓ Frequently Asked Questions
Q1. What if I never sell the forked coin or airdrop?
You may still owe income tax on the value at the time you gained control.
Q2. What if I never claimed the airdrop?
If you truly never had control (no access / no ability to transfer), it may not be taxable yet.
“Control” is the deciding factor.
Q3. Is it taxed twice?
It can be: first as ordinary income at receipt/control, and later as capital gain/loss when sold or swapped.
Q4. Will I receive Form 1099-DA for 2025 activity?
Possibly. Many brokers are expected to provide 1099-DA payee statements for 2025 transactions in early 2026.
Always reconcile the form with your own wallet/account records before filing.
Q5. If the 1099-DA shows proceeds but no basis, what then?
You may need to supply your own basis records (especially if you used multiple wallets or moved assets between platforms).
Clean records now can prevent future mismatch notices.
🔗 Reference Links
EA Tax Guide Disclaimer (Updated: Jan 2026)
This article is based on U.S. federal tax guidance for the 2025 tax year (filed in 2026). State tax rules (including New York) may differ.
For complex situations (multiple wallets, exchange restrictions, DeFi activity, large volumes), consider professional review.