Learn what crypto staking rewards are and what you need to do to report them on your tax return
A decision made on Monday by the Internal Revenue Service (IRS) states that a cryptocurrency investor who receives rewards for validating activities on a proof-of-stake network shall declare those payments as income in the year the investor gains possession of those tokens.
According to the legal analysis, the fair market value of the validation rewards received must be calculated as of the time the US Taxpayer gains control of the tokens and “is included in the taxpayer’s gross income in the taxable year in which the taxpayer acquires dominion and control over the validation rewards.”
The agency claims that the law also applies to investors who stake tokens on a cryptocurrency exchange if “the taxpayer receives additional units of cryptocurrency as rewards as a result of the validation.”
The IRS’s legal advice comes at a time when other federal and state regulators, particularly the US. Securities and Exchange Commission (SEC) have targeted crypto exchanges’ staking services as fraudulently promoted securities. Kraken, for instance, shut down its staking platform in February to resolve SEC complaints. The government recently claimed that Binance’s staking service is against securities legislation.
