Accounting

General tax aspects of airdrop and bounties

Blockpit partners with Airdropbob.com

Blockpit enters into a cooperation with Airdropbob.com. Airdrops and bounties have been a common means of marketing since the rise of public blockchains to draw existing user groups’ attention to new products and reward them for doing so.

Blockpit - Erbana Media - Airdropbob Small

Popular examples of airdrops

Examples are the XRP flare, Uniswap, and BEST-Reward airdrops. They took snapshots of the XRP stocks at a predefined time to measure the distribution of flare tokens to the user. In the Uniswap airdrop, early adopters of the Uniswap platform spontaneously received the UNI token. Meanwhile, Uniswap is one of the most extensive DeFi applications, and the price of the UNI token is many times higher than when it was distributed. Even well-known exchanges like Bitpanda work with concepts like snapshots and airdrops distributed as monthly rewards for trading and holding the in-house exchange tokens BEST.

General Tax Aspects of Airdrop and Bounties

Looking at the inflow of cryptocurrencies through airdrops and bounties from a tax perspective, it quickly becomes apparent that there is still uncertainty among users regarding the taxation of cryptocurrencies. The legal frameworks of individual countries also differ significantly. The benefits received from profit increases mustn’t subsequently lead to unwanted surprises. According to the U.S. 1040 tax return form, individuals must declare whether cryptocurrencies were received or traded during the 2020 tax year. Generally, the USA treats cryptocurrencies as property for tax purposes. 

According to the IRS the income from airdrops and bounties is to be taxed as ordinary income. The basis for the valuation was the fair market value when the airdrop or bounty was received. All further gains/losses made from the inflow date within 365 days of sale are treated as short-term gains/losses and have to be reported on the taxpayer’s form 1040 with tax rates between 10-37%. From a holding period of 366 days onwards, they are subject to the long-term capital gains tax rate of 0-20%. Also, taxation is based on the first-in-first-out (FIFO) principle, particularly in the USA.

 

Consistent transaction history

Blockpit’s Cryptotax application also calculates based on the FIFO (First-In-First-Out) and depot separation principles. As one of the leading providers of optimized portfolio tracking, Blockpit offers Big4 audited tax reports for the USA, Germany, Austria, and Switzerland and generic tax reports for users worldwide. We recommend that all taxpayers document all income from cryptocurrencies, as these transaction histories can also be requested retroactively by the tax office as evidence.

Win a Blockpit License

In the partnership with Airdropbob.com, we give away 5 Advanced licenses in the scope of the tax years 2015-2021, among all participants of the current Airdrop campaign.
Win one of five Blockpit Advanced licenses here
Besides, all newly registered users receive a 10% discount on Blockpit products with this link

Disclaimer: The information provided in this blog post is for general information purposes only. The information was completed to the best of our knowledge and does not claim either correctness or accuracy. For detailed information on crypto regulations, we recommend contacting a certified legal advisor in the respective country. If any questions occur, feel free to contact us on our social media channels.

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