Hello,
I’m not sure the best place to post this but I was alarmed at all the incorrect information I was reading on this site and felt like it could help people. I am a tax professional with 10+ years working in finance/accounting, tax, and investment analysis.
FOR US FEDERAL INCOME TAX:
-Brave BAT rewards are taxable income in the year they are received from Brave
-The income from Brave rewards equals the FMV (Qty of BAT received x current market price of 1 BAT in USD) of the BAT upon receipt from Brave
-The cost basis of the BAT reward received is equal to the USD FMV of the BAT upon receipt
-Generally, there are no fees on receiving Brave rewards in the form of BAT. However, the USD value of the fee can be deducted from the FMV of the BAT received to determine your adjusted cost basis
-Generally, income in the form of BAT Brave rewards can be reported on Form 1040 Schedule 1 Line z “Other Income” (Form Year 2023/24). The income reported should be net of fees, if any.
-It is advisable to report the cost basis as well as the quantity of the BAT received in the “Description” field of the line (this will provide proof of cost basis to the IRS which can be referenced if, in the future, your BAT is sold for USD)
-When (if) BAT is sold at a future date, you will report the capital transaction like any other long/short-term capital gains. The documentation of your cost basis in the BAT sold reported on Form 1040 Schedule 1 Line z “Other Income” will be your proof of cost basis for determining gains (losses)
INCORRECT INFORMATION OFTEN REPEATED HERE:
-Brave BAT rewards are not taxable income - this is false, the FMV upon receipt is taxable income
-The cost basis of BAT received from Brave is $0 since I got it for free - this is false, the cost basis is equal to the FMV of the BAT upon receipt (less fees, if any)