Effect of cost basis on crypto staking

Hi,

I stake my cryptos and was wondering how the cost basis of cryptos changes due to staking? I understand that staking rewards are considered as regular income when filing for taxes. But when I "sell" these staked cryptos at some point of time in the future, I need to ascertain what my cost basis is so that I can calculate my profit or loss.

Let me give you an example:

Say I bought Polkadot (DOT) 3 times:

a] 10 DOTs for $20/DOT in January

b] 20 DOTs for $30/DOT in February

c] 30 DOTs for $40/DOT in March

Say I "staked" 30 DOTs in April and "unstake" (30 + staking rewards) DOTs in May

Since I apply FIFO for my tax calculation, so 10 DOTs that I purchased in Jan + 20 DOTs I purchased in Feb will be considered "staked'.

Does my cost basis becomes $40/DOT (the remaining "unstaked" DOT)?

Now when I "unstake" the (30 + staking rewards) DOTs in May, shouldn't my cost basis calculation for "unrealized gain" take into account the $20/DOT and $30/DOT I paid for the original DOTs I had bought in the month of Jan and Feb? Or will it remain at $40/DOT?

I want to understand how staking part of my crypto assets affect the cost basis calculation.

Thanks for your help.

Regards,

347

Employee Tax Expert

Aug 31, 2022 4:26:07 PM

Please see the Turbotax link for Crypto that references staking and how the earnings are recorded.

https://turbotax.intuit.com/tax-tips/investments-and-taxes/your-cryptocurrency-tax-guide/L4k3xiFjB

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Effect of cost basis on crypto staking