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:

Tags

Decoding crypto and the markets. Daily, with Byron Gilliam.

Upcoming Events

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

Research Report Templates.png

Research

Content Delivery Networks (CDNs) represent low-hanging fruit in a massive market ripe for Web3-driven disruption. The global CDN market was valued at ~$28B in 2024, and is projected to surpass $140B by 2034, (18.75% CAGR) underscoring the immense demand for efficient content delivery.

article-image

Sponsored

Injective is not waiting for the future of finance. It is bringing it directly to us, today.

article-image

Bitcoin has been bullish for nearly 1,000 days

article-image

Robinhood announced that it’s building an L2 and also plans to launch staking for US users

article-image

“We’re not really doing anything controversial,” said co-founder Zak Folkman at Permissionless last week

article-image

Why equities are more stable than in past decades, plus advice from Peter Lynch

article-image

As Permissionless speakers talk on-chain RWA potential, tokenized stock platform Dinari secures FINRA broker-dealer approval