Some crypto arrives as income rather than as an investment you bought. Staking rewards, mining, interest and most airdrops are generally taxed as ordinary income at their fair market value on the day you gain control of them. That value then becomes the cost basis for a future disposal, so the same tokens are touched twice by the tax system in two different ways.
The two step pattern
This is the part that confuses people, and it is not double taxation. Say you receive a staking reward worth one hundred dollars. That hundred dollars is income now. Your basis in those tokens is one hundred dollars. If you later sell them for one hundred and thirty, you have a thirty dollar capital gain, not a hundred and thirty dollar one. If you sell them for eighty, you have a twenty dollar capital loss, and you still owed income tax on the original hundred.
What falls into which bucket
| What you received | Usual treatment |
|---|---|
| Staking rewards | Ordinary income at fair market value when you gain dominion and control over them. |
| Mining rewards | Ordinary income at value on receipt. If mining is a business rather than a hobby, self employment considerations apply. |
| Interest from a lending platform | Ordinary income, generally reported as interest. |
| Airdrop you claimed | Ordinary income at value when you claimed and could dispose of it. |
| Airdrop you never asked for | Genuinely contested. The conservative position treats it as income on receipt; some practitioners argue there is no income until you can and do exercise control. |
| A hard fork producing new coins | Generally income when you gain control of the new asset, if you do. |
| Referral or promotional bonuses | Ordinary income, like any other promotional payment. |
| Points that later convert to a token | The points themselves are usually nothing. The token is income when you receive it. |
Valuing something with no price
A reward in a liquid token is easy to value. A token that has just launched, has one thin pool and no listing is not, and taking the first quoted price on a screener can substantially overstate what you actually received. Record the source you used and the time, and keep it. A defensible method applied consistently is worth more than a precise number you cannot explain.
Dominion and control
The phrase that decides timing is whether you have dominion and control: can you actually move or sell the asset. Rewards that accrue but cannot be withdrawn, tokens locked by a vesting contract and airdrops that require a claim you have not made are all cases where the timing question matters, and where the answer changes what year the income falls in.
Common questions
Am I taxed twice on staking rewards?
No. The reward is income at its value on receipt, and that same value becomes your cost basis. A later sale only taxes the change since then. It feels like two events because it is two events, on two different amounts.
What if I never claimed an airdrop?
This is genuinely unsettled. The conservative position is that unclaimed tokens sitting in your wallet are income on receipt. Others argue there is no income until you have and exercise control. It is worth asking a professional rather than guessing.
How do I value a token nobody trades?
Use a defensible source, record which one and when, and apply it consistently. A documented reasonable method matters more than a precise figure you cannot reproduce later.
Where to go next
Confused about your own records?
We cannot prepare your return and we can help you understand what your transaction history actually says, so the conversation with your accountant is a short one.