The IRS has made it clear: crypto staking rewards are taxable income the moment you get them. This isn’t new, but they’ve recently reaffirmed this stance in a legal battle.
Staking Rewards: Taxable Income, Not “New Property”
The IRS says staking rewards aren’t like creating something new (like writing a book or growing crops). They’re considered income, and you owe taxes on them right away, regardless of whether you sell them. This applies to rewards from proof-of-stake (PoS) blockchains and similar systems. You need to report the fair market value of your rewards when you receive them.
The Jarrett’s Legal Fight
A couple, the Jarretts, disagreed with this. They staked Tezos (XTZ) and argued their rewards were “new property,” only taxable upon sale. They even compared it to farming or writing a book. They lost their initial lawsuit after the IRS offered a partial refund, which they refused, hoping for a broader legal ruling. They’ve since filed a second lawsuit, and the outcome could significantly impact how crypto staking is taxed in the US.
The IRS and Crypto Taxes: A Broader Perspective
While the IRS is clarifying its stance on crypto taxes, they’ve also introduced measures to make filing easier for taxpayers. However, they’re also cracking down on tax evasion. A recent example is someone sentenced to two years in prison for failing to report crypto gains.
(Note: Bitcoin’s price at the time of writing was $97,471.)/p>
