The IRS decreed US crypto investors deriving income from staking services must include the fair market value of those rewards in the gross income the moment they gain control of those assets.
The Internal Revenue Service (IRS) in the United States has recently announced that cryptocurrency investors must now report staking rewards as a part of their gross income. As per the IRS directive, taxpayers are required to include the fair market value of staking rewards as soon as they gain control of those assets.
🌎《Now you can now start trading at TNNS PROX》📈
🔥Start trading today, click "sign up" from the link above.
IRS taxes crypto staking rewards. Staking Rewards Become Taxable
According to the IRS, staking rewards earned in cryptocurrency are subject to income tax in the US as soon as they are acquired by the taxpayer. This means that when a digital asset owner receives units of cryptocurrency as incentives for validation, the fair market value of these rewards must be reported as income in the same tax year they were obtained. The IRS provides specific guidelines for this process. IRS taxes crypto staking rewards.
“The fair market value is determined as of the date and time the taxpayer gains dominion and control over the validation rewards.”
The IRS applies general tax principles to both property transactions and crypto transactions. Therefore, any rewards earned through staking must be included in an individual's gross income, similar to rent, royalties, and compensation for goods and services. Additionally, taxpayers who are compensated for goods and services through cryptocurrencies, such as crypto miners, must include the market value of the assets as part of their taxable income. The IRS provides further clarification on this matter.
“If a cash-method taxpayer stakes cryptocurrency native to a proof-of-stake blockchain and receives additional units of cryptocurrency as rewards when validation occurs, the fair market value of the validation rewards received is included in the taxpayer’s gross income in the taxable year in which the taxpayer gains dominion and control over the validation rewards.”
The Future Of Staking In The US Remains Unclear
In recent months, staking services have been a topic of controversy in the US. The uncertainty began when the SEC sued Kraken, a crypto exchange, over its staking business. Kraken agreed to suspend the service and pay a $30 million fine, which further fueled the debate.
Coinbase has requested regulatory clarity from the SEC regarding the staking industry, particularly in terms of its definition of securities. The exchange has petitioned the securities agency to exclude staking from its definition of securities. However, the SEC still considers staking services through intermediaries, such as in the case of Kraken, as securities that meet the requirements of the Howey Test.
Despite ongoing requests for clarification from the SEC, the agency has not yet provided any guidance or regulation. Due to regulatory uncertainty in the US, Coinbase announced the suspension of its staking services in California, New Jersey, South Carolina, and Wisconsin following a preliminary order by local state regulators.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
Comments