> For the complete documentation index, see [llms.txt](https://docs.recap.io/us-tax-guide-for-individuals/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.recap.io/us-tax-guide-for-individuals/cryptocurrency-tax/which-taxes-apply/income-tax.md). # Income Tax ![](/files/cBQ823qJyVJgQO29y3V4) In general, any cryptocurrency that you receive but have not “bought” can be classified as ordinary income and should be reported under either the “other income” section, [Schedule B](https://www.irs.gov/pub/irs-pdf/f1040sb.pdf), or [Schedule C](https://www.irs.gov/pub/irs-pdf/f1040sc.pdf) of your income tax return. The location on your tax return will depend on whether the income was from a trade or business, an isolated event, or passive activity. {% hint style="info" %} **These transactions generate ordinary income:** * [Airdrops](/us-tax-guide-for-individuals/transaction-types/airdrops.md) * [Getting](/us-tax-guide-for-individuals/transaction-types/employment-income.md) [paid in cryptocurrencies for goods and services you provide](/us-tax-guide-for-individuals/transaction-types/employment-income.md) * [Staking Rewards](/us-tax-guide-for-individuals/transaction-types/staking.md) * [Mining Rewards](/us-tax-guide-for-individuals/transaction-types/mining.md) **Note:** Certain DeFi (or decentralized finance) rewards are considered ordinary income. Please consult your accountant or tax attorney for questions regarding your DeFi activity and its tax implications. {% endhint %} For individuals, think of ordinary income as your paycheck from your employer, any payments made to you for freelance work, receiving a gift containing fiat currency, etc. Currency received under these circumstances would be considered ordinary income and subject to the ordinary income tax rate. For businesses, cryptocurrency could also be business income, which could allow you to deduct business expenses. Please consult your accountant or tax attorney for which items could be deducted from your tax liability. A good rule of thumb for ordinary income is: If you sell or exchange cryptocurrency not held as a capital asset, you will realize ordinary gain or loss.\[1] \[2] \[1] I.R.S. Notice 2014-21, . \[2] I.R.S. Rev. Rul. 2019-24 . --- # Agent Instructions This documentation is published with GitBook. GitBook is the documentation platform designed so that both humans and AI agents can read, navigate, and reason over technical content effectively. Learn more at gitbook.com. ## Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter, and the optional `goal` query parameter: ``` GET https://docs.recap.io/us-tax-guide-for-individuals/cryptocurrency-tax/which-taxes-apply/income-tax.md?ask=&goal= ``` `ask` is the immediate question: it should be specific, self-contained, and written in natural language. `goal` is optional and describes the broader end goal you are ultimately trying to accomplish on behalf of the user. GitBook uses it to tailor the answer towards what is most useful for that goal. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.