Tax treatment of staking rewards

Forum|Forum|2 years ago
November 15, 2023
2 replies
5 views

I am considering staking some crypto. Can you help me understand the tax treatment regarding the new coins awarded as a result of staking crypto? Are those new coins taxable income at the point they are awarded, or are they not taxable until the newly awarded coins are actually spent? Thank you.

Ask the Experts - Crypto - Nov 2023

Andrew_W

Employee Tax Expert

Hi @DavidW7,

Staking crypto is treated as taxable income, based on the fair market value of the crypto at the time it is received. This is analogous to earning interest from a savings account.

If you hold the staking crypto received for investment, you may also have a capital gain or loss when you later sell or exchange.

This is a good resource for crypto taxes: https://turbotax.intuit.com/tax-tips/investments-and-taxes/your-cryptocurrency-tax-guide/L4k3xiFjB

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HankR1

Level 2

Hi,

The IRS released guidance on staking rewards this year. In short, staking rewards are taxable as income both when you receive (meaning having control over) it as well as when you dispose of it. Disposing could produce a more favorable tax situation as it's considered a capital gain.

Other experts have posted regarding this topic too:

chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.irs.gov/pub/irs-utl/rev-ruling-2023-14.pdf

https://ttlc.intuit.com/community/taxes/discussion/where-do-i-report-crypto-staking-rewards/00/2529555#:~:text=The%20IRS%20ruled%20that%20staking,been%20issued%20is%20U.S.%20dollars.

LRPASS

Level 2

Thanks, HankR1, for the answer. I checked the link you provided, and it says this: "You treat staking income the same as you do mining income: counted as fair market value at the time you earn the income and subject to income and possibly self-employment taxes."

I'm a little confused on how to report the specifics on staking. Let's make-up a crytpo called ABC. I have 50 ABC's. I stake it starting 3/2023. By 12/31/23 I have 55 ABC's. I get that the 5 ABC's is "interest", but how do I calculate the US dollar amount? Is it 5 X the value of ABC on 12/31/23? What value do I use?

And this would be taxed at ordinary income, correct? TY!

Andrew_W

Employee Tax Expert

Hi @LRPASS,

Staking rewards are considered taxable income at the fair market value of the asset in USD on the date they are received.

As an example, if the staking reward is received on 4/1/2023, the fair market value of the reward as of that date, in USD, is the income amount. Staking rewards are treated as ordinary income.

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