- Understanding Airdrop Income Taxation in Canada
- Step-by-Step Guide to Reporting Airdrop Income
- Essential Record-Keeping Requirements
- Special Airdrop Scenarios Explained
- Hard Fork Airdrops
- Task-Based Airdrops
- Non-Fungible Token (NFT) Airdrops
- Frequently Asked Questions (FAQs)
- Do I pay tax if I didn’t sell my airdropped tokens?
- What if the airdropped token has no market value?
- How do I report airdrops worth less than $100?
- Can I deduct gas fees paid to claim an airdrop?
- What happens if I forget to report an airdrop?
- Proactive Compliance Tips
Understanding Airdrop Income Taxation in Canada
In Canada, cryptocurrency airdrops – free distributions of tokens to wallet holders – are considered taxable income by the Canada Revenue Agency (CRA). When you receive tokens through an airdrop, their fair market value (FMV) at the time of receipt must be reported as ordinary income on your annual tax return. This applies regardless of whether you actively claimed the tokens or received them automatically. The CRA treats airdrops as income because they represent an economic benefit, similar to receiving dividends or bonuses.
Step-by-Step Guide to Reporting Airdrop Income
- Determine Receipt Date & Fair Market Value
Record the exact date you gained control of the airdropped tokens. Calculate their FMV in Canadian dollars using reputable exchange rates at that time. - Convert Value to CAD
Use the Bank of Canada’s daily exchange rate for the token’s original currency (e.g., USD to CAD) on your receipt date. - Report as Other Income
Include the total CAD value under Line 13000 – Other Income on your T1 tax return. Label it clearly as “Crypto Airdrop Income.” - Track Subsequent Dispositions
If you later sell or trade these tokens, calculate capital gains/losses using your FMV as the adjusted cost base (ACB).
Essential Record-Keeping Requirements
Maintain detailed records for 6 years after filing:
- Date and time of airdrop receipt
- Token name, quantity, and wallet address
- FMV source documentation (screenshots, exchange data)
- Bank of Canada exchange rate used for conversion
- Transaction IDs and blockchain explorer links
Special Airdrop Scenarios Explained
Hard Fork Airdrops
Tokens from blockchain splits (e.g., Bitcoin Cash from Bitcoin) follow the same FMV reporting rules as standard airdrops.
Task-Based Airdrops
If you performed services (social media promotions, testing) to receive tokens, the FMV is considered self-employment income – report on Form T2125.
Non-Fungible Token (NFT) Airdrops
NFT airdrops are taxed similarly to crypto tokens based on their FMV at receipt.
Frequently Asked Questions (FAQs)
Do I pay tax if I didn’t sell my airdropped tokens?
Yes. Tax applies upon receipt based on FMV, even if you hold the tokens indefinitely.
What if the airdropped token has no market value?
If genuinely worthless at receipt (no trading activity), report $0 income. Document evidence of illiquidity.
How do I report airdrops worth less than $100?
All airdrops must be reported regardless of value. The CRA requires full disclosure of crypto transactions.
Can I deduct gas fees paid to claim an airdrop?
No. Transaction fees to receive airdrops are not deductible since the tokens are already considered income.
What happens if I forget to report an airdrop?
File a T1 Adjustment Request immediately. Unreported income may incur penalties of 5%-50% plus interest.
Proactive Compliance Tips
Use crypto tax software (e.g., Koinly, CoinTracker) to automate FMV calculations and generate CRA-compliant reports. Consult a crypto-savvy accountant if handling complex airdrops or high-value distributions. Always report in Canadian dollars using Bank of Canada exchange rates to avoid discrepancies.
