IRS requires reporting of staking rewards as taxable income

Crypto rewards must be included in income once the taxpayer gains control over them, the IRS ruled

article-image

hxdbzxy/Shutterstock, modified by Blockworks

share

US cryptocurrency investors must report staking rewards as taxable income.

The Internal Revenue Service (IRS) said on Monday that if a taxpayer stakes cryptocurrency on a proof-of-stake blockchain and receives rewards, the fair market value of those rewards should be included in the taxpayer’s gross income in the taxable year when they gain control over them.

“The fair market value is determined as of the date and time the taxpayer gains dominion and control over the validation rewards,” the agency said in a public administrative ruling.

The same rule applies if a taxpayer stakes cryptocurrency on a proof-of-stake blockchain through a cryptocurrency exchange and receives additional cryptocurrency units as rewards.

Staking refers to the involvement of individuals in the validation and verification of transactions on a proof-of-stake blockchain network. 

When individuals stake their cryptocurrency, they help to keep the blockchain network secure and verify transactions. In return for doing this, they receive rewards in the form of extra tokens.

The rewards can vary between different blockchain networks, but it’s typical to earn returns of around 6% to 12% across DeFi protocols.

The legal guidance comes after US regulators took action against staking services provided by crypto exchanges, considering them as unlawfully offered securities.

The SEC targeted Binance.US and Coinbase’s staking-as-a-service programs, alleging violations of securities laws.

Meanwhile, Kraken faced two charges related to its staking products and settled both cases, paying $30 million and agreeing to discontinue the staking program earlier this year.


Get the news in your inbox. Explore Blockworks newsletters:

  • Blockworks Daily: The newsletter that helps thousands of investors understand crypto and the markets, by Byron Gilliam.
  • Empire: Start your morning with the top news and analysis to inform your day in crypto.
  • Forward Guidance: Reporting and analysis on the growing intersection of crypto and macroeconomics, policy and finance.
  • 0xResearch: Alpha directly in your inbox. Market highlights, data, degen trade ideas, governance updates, token performance and more.
  • Lightspeed: Built for Solana investors, developers and community members. The latest from one of crypto’s hottest networks.
  • The Drop: For crypto collectors and traders, covering apps, games, memes and more.
Tags

Upcoming Events

Javits Center North | 445 11th Ave

Tues - Thurs, March 18 - 20, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

Industry City | Brooklyn, NY

TUES - THURS, JUNE 24 - 26, 2025

Permissionless IV serves as the definitive gathering for crypto’s technical founders, developers, and builders to come together and create the future.If you’re ready to shape the future of crypto, Permissionless IV is where it happens.

Old Billingsgate

Mon - Wed, October 13 - 15, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

recent research

Unlocked by Template Presentation.jpg

Research

The Solana validator landscape has changed drastically over the past year. The chain now has 1,332 active validators with 380.9 million SOL staked (63.9% of supply) as of February 2025. Validator revenue had diversified beyond inflationary rewards (still making up 55%) to include Jito tips (30%), priority fees (24%), and base fees (<1%), in January, especially with the increased activity on Solana. Since then, issuance has become dominant again (76%), while Jito tips (14%), priority fees (9%), and base fees (less than 1%) have reduced in share of February 2025. There has been a strong shift towards non-inflationary revenue sources, which have become more central to validator economics as priority fees and off-chain blockspace auctions gain traction. Client diversity has also improved drastically, with implementations such as Agave, Jito-Solana, and Frankendancer already in use, and upcoming clients like Firedancer and Sig expected to further strengthen resilience and reduce reliance on a single codebase.

article-image

BWR analyst Carlos Gonzalez Campo explains the consequences of SOL inflation and transfers lost to “leaky buckets”

article-image

Empire co-host Santiago Santos makes the case that memecoins have actually helped push infra forward…just not in the way you think

article-image

A16z Crypto lists seven buckets for tokens and recommendations for how to regulate them, in a filing submitted to the SEC

article-image

New model aims to resolve trading inefficiencies with a single execution layer and market maker changes

article-image

Investors navigating BTC face short-term unpredictability, influence from other markets

article-image

The GENIUS Act aims to establish regulatory guidelines for stablecoins