Quick answer
Vested tokens hit your wallet and the tax bill arrives — even if you can't sell them yet.
DeFi & Web3
Australia
Canada
Germany
United Kingdom
United States
Token Vesting
The scheduled release of cryptocurrency tokens to founders, employees, or investors over time — each vesting event is typically a taxable income moment.
AustraliaCanadaGermanyUnited KingdomUnited StatesUnderstanding Token Vesting on crypto
Token vesting is a mechanism used by blockchain projects to gradually release tokens over a predetermined schedule — commonly 2–4 years with a 1-year cliff — to team members, advisors, or investors. In most jurisdictions, tokens become taxable as income when they vest, at fair market value on the vesting date. This means recipients may face income tax bills before they can sell, particularly in bull markets. When tokens are eventually sold, any further gain or loss from the vesting price is a capital gain or loss. Different jurisdictions treat vesting differently — Germany's 1-year tax-free holding period for CGT starts from the vest date.
Token vesting is a mechanism used by blockchain projects to gradually release tokens over a predetermined schedule — commonly 2–4 years with a 1-year cliff — to team members, advisors, or investors. In most jurisdictions, tokens become taxable as income when they vest, at fair market value on the vesting date. This means recipients may face income tax bills before they can sell, particularly in bull markets. When tokens are eventually sold, any further gain or loss from the vesting price is a capital gain or loss. Different jurisdictions treat vesting differently — Germany's 1-year tax-free holding period for CGT starts from the vest date.
What this means for your crypto activity
Tax on vest date
Income tax is triggered on the vesting date — not the grant date and not when you sell.
Tax before liquidity
You may owe tax on tokens worth significantly more than when originally granted, with no cash to pay it.
Post-vest gains separate
After vesting, additional price appreciation creates a separate capital gain when sold.
Price drop after vest
If the token price drops after vesting and you sell at a loss, the income tax already paid is not refunded — only a capital loss arises.
Record each vest
Precise records of each vest date and FMV at vest are essential.
- Income tax is triggered on the vesting date — not the grant date and not when you sell.
- You may owe tax on tokens worth significantly more than when originally granted, with no cash to pay it.
- After vesting, additional price appreciation creates a separate capital gain when sold.
- If the token price drops after vesting and you sell at a loss, the income tax already paid is not refunded — only a capital loss arises.
- Precise records of each vest date and FMV at vest are essential.
Seeing it in action
Example scenario
Rajan was granted 120,000 tokens in January 2023 with a 1-year cliff and 4-year monthly vesting. By January 2024, 30,000 tokens vest when the price is $0.80 — creating $24,000 in ordinary income. His cost basis in the vested tokens is $0.80 each. By March 2024 he sells at $1.20, generating a $12,000 short-term capital gain. Two separate tax events from one vesting event.
How this works across jurisdictions
- Australia
ATO treats vested tokens as assessable income at vest; cost base for CGT purposes is the value assessed as income.
- Canada
Treated similarly to employee stock options; taxable employment benefit at vest; 50% inclusion on post-vest gains.
- Germany
Income tax on value at vest; 1-year holding period for CGT exemption runs from vest date, not grant date.
- United Kingdom
Employment-related tokens follow ITEPA 2003; income tax and NIC due at vest on FMV; disposal subject to CGT.
- United States
Tokens taxable as ordinary income at FMV on vest date; IRC 83(b) election has uncertain applicability to tokens; subsequent gain is capital gain.
Take Control of Your Crypto Finances
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