Is Crypto Staking Taxable? — IRS Rules Explained
The IRS considers staking rewards taxable income the moment you receive them — or gain "dominion and control" over them. Your reward tokens are taxed at their fair market value on the date received, regardless of whether you sell them.
Calculate your staking tax liability with the Crypto Tax Calculator.
How Staking Rewards Are Taxed
Staking creates two taxable events — one when received, one when sold:
| Event | Tax Type | Rate |
|---|---|---|
| Receiving staking reward | Ordinary income | 10-37% (your marginal rate) |
| Selling the reward later | Capital gain/loss | 0-20% (long-term) or 10-37% (short-term) |
Example — You stake ETH and receive 2 ETH in rewards over the year:
| Step | Detail | Tax Impact |
|---|---|---|
| Receive 1 ETH reward (March) | ETH price: $3,000 | $3,000 ordinary income |
| Receive 1 ETH reward (September) | ETH price: $3,500 | $3,500 ordinary income |
| Total staking income | $6,500 reported on taxes | |
| Sell both ETH in December | ETH price: $4,000 | $4,000 + $500 = $4,500 in capital gains |
Your total tax exposure: $6,500 in ordinary income PLUS $4,500 in short-term capital gains.
When Is the Taxable Event?
The IRS hasn't published specific staking guidance, but based on existing rulings (Revenue Ruling 2023-14), staking rewards are taxable when you gain dominion and control:
| Staking Method | When Taxable |
|---|---|
| Direct staking (native wallet) | When rewards are added to your balance |
| Exchange staking (Coinbase, Kraken) | When rewards appear in your account |
| Liquid staking (Lido, Rocket Pool) | When stTokens (stETH, rETH) accrue value — debated |
| Locked staking | When the lock period ends and you can access rewards |
The liquid staking question is the most contested. Some argue stETH's value increase isn't a receipt of new tokens, so tax should defer until unstaking. The IRS hasn't ruled definitively on this yet.
Staking Income Reporting
Report staking rewards as Other Income on your tax return:
| Form | Where |
|---|---|
| Individuals | Schedule 1, Line 8z ("Other income") |
| Self-employment staking | Schedule C (if operating as a business) |
| 1099-MISC | Exchanges may issue this for staking rewards over $600 |
Starting in 2026, major exchanges are required to issue 1099-DA forms that include staking rewards. The IRS will match these against your return.
Cost Basis of Staking Rewards
Your cost basis for staking rewards = the fair market value at the time you received them. This is the same amount you reported as income.
Why this matters:
If you received 1 ETH as a staking reward when ETH was $3,000:
- You report $3,000 as income (that year)
- Your cost basis for that ETH is $3,000
- If you later sell for $4,000, your gain is only $1,000
If ETH drops to $2,000 and you sell:
- You have a $1,000 capital loss
- But you already paid tax on $3,000 of income
- Net tax effect: paid tax on $3,000 income, then got a $1,000 capital loss deduction
Staking vs. Mining — Tax Treatment Comparison
| Feature | Staking | Mining |
|---|---|---|
| Income type | Ordinary income | Ordinary income (or self-employment) |
| Deductible expenses | Limited | Hardware, electricity, space |
| Self-employment tax | Generally no | Yes, if operating as a business |
| 1099 reporting | Yes (from exchanges) | Varies |
The key difference: miners who operate as a business can deduct equipment, electricity, and other expenses on Schedule C. Stakers typically can't deduct anything — the reward is pure income with no offsetting business expenses (unless staking is your primary business).
Strategies to Manage Staking Tax
Track every reward. Each staking payout is a separate tax lot with its own cost basis and holding period. If you receive daily rewards, that's 365 separate taxable events per year.
Hold rewards for 1+ year before selling. Converts the eventual sale from short-term (up to 37%) to long-term capital gains (0-20%). You still owe income tax when received, but the appreciation is taxed at a lower rate.
Consider tax-loss harvesting. If staking rewards decline in value after receipt, selling them creates a capital loss that can offset other gains. You already paid income tax on the higher value, so the loss provides partial relief.
Estimate quarterly taxes. If staking produces significant income, you may owe quarterly estimated payments to avoid underpayment penalties. Use Form 1040-ES to calculate.
See your total crypto tax obligation with the Federal Tax Calculator.
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