IRS Rules: Crypto Staking Rewards are Taxable Income

• The IRS has ruled that U.S. cryptocurrency investors must include staking rewards in their gross income as they are treated as property for federal income tax purposes.
• Taxpayers must include the fair market value of their staking rewards in their gross income as soon as they gain control of the crypto assets.
• This applies to investors who receive rewards by staking their assets through crypto exchanges or miners who receive cryptocurrencies as payment for goods and services.

IRS Rules Crypto Staking Rewards As Taxable Income

The Internal Revenue Service (IRS) has ruled that U.S. cryptocurrency investors must include staking rewards in their gross income since crypto assets are treated as property for federal income tax purposes.

Staking Rewards Must Be Included In Gross Income

According to an official document, taxpayers must include the fair market value of their staking rewards in their gross income as soon as they gain control of the crypto assets.

Proof-of-Stake Consensus Mechanism Explained

In the Proof-of-Stake consensus mechanism, crypto staking refers to the pledging of cryptocurrencies toward validating transactions on the blockchain and getting rewards.

Tax Principles Applied To Property Transactions

As per the IRS, since general tax principles applied to property transactions are applicable to crypto transactions, rewards gained from validation activities must be recorded as gross income alongside rent, royalties, and compensation for goods and services.

Fair Market Value Of Staking Rewards Determined On Date & Time Investor Gains Control Of Assets

The agency explained that the fair market value of staking rewards is determined on the date and time the crypto investor gains control of the assets. The same applies to investors who receive rewards by staking their assets through crypto exchanges or miners who receive cryptocurrencies as payment for goods and services.