staking

In the U.S., the IRS currently treats crypto staking rewards as ordinary income at the time you gain "dominion and control" over the assets, such as when they become transferable or spendable. A separate capital gains tax applies when the rewards are later sold or otherwise disposed of.

Current Tax Rules
Income Recognition: You must report the fair market value (FMV) of the staking rewards in U.S. dollars at the precise date and time you receive control over them. This amount is subject to your standard income tax rate.
Double Taxation Argument: Lawmakers and industry experts have criticized this approach, arguing it results in "double taxation" (once on receipt as income, and again on disposal as a capital gain) and creates significant administrative burdens for taxpayers.
Capital Gains: When you eventually sell, trade, or spend your staked rewards, you will incur a capital gain or loss based on the difference between the FMV at the time you originally received them (your cost basis) and the price at disposal.
Reporting: Individual taxpayers typically report staking income on Form 1040, Schedule 1 as "Other Income". If you dispose of the assets, you report the details on Form 8949 and summarize on Schedule D. Businesses report on Schedule C, which allows for deducting related expenses.

Legislative and Legal Review
Lawmaker Push for Reform: A bipartisan group of U.S. House lawmakers recently urged the IRS to revise its guidance before the 2026 tax year. They propose taxing staking rewards only at the time of sale to align with actual economic gain and reduce administrative complexity.
Ongoing Court Case: The legal challenge in Jarrett v. United States is ongoing, with taxpayers arguing that newly created tokens are self-created property and should only be taxed upon sale, similar to how mined minerals or harvested crops are treated. The IRS previously issued a refund in the initial case to make it moot but the taxpayers filed a new lawsuit in October 2024 to seek a final judicial ruling on the matter.
New Reporting Forms: Starting in 2026, custodial platforms will be required to issue a new Form 1099-DA to report digital asset sales and income, including staking rewards, which will increase scrutiny on reporting.

For the most accurate and up-to-date information, taxpayers should consult with a qualified crypto tax professional or refer to official IRS guidance available on the IRS website.

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U.S. lawmakers propose a crypto tax break for stablecoin payments ≤ $200 and a 5-year deferral on staking and mining rewards, a major push to modernize digital asset taxation, and remove "phantom income" penalties.
Context in a Nutshell
In a landmark bipartisan move, U.S. Representatives Max Miller and Steven Horsford introduced a draft bill designed to modernize crypto taxation for everyday users. The proposal would exempt small stablecoin payments (≤ $200) from capital gains taxes, provided the stablecoin is dollar-pegged and regulated under the GENIUS Act. It also offers a five-year deferral option for staking and mining rewards, easing the long-standing "phantom income" problem.

These measures reflect a growing recognition in Washington that the current tax regime, designed for securities and traditional assets, doesn't align with how digital assets are used today. Additional provisions would align the treatment of digital assets more closely with that of other financial products by adopting wash-sale and mark-to-market accounting rules.
What You Should Know
U.S. lawmakers have unveiled a bipartisan tax proposal to ease the crypto tax burden for everyday users, focusing on small stablecoin payments and staking/mining rewards.The draft bill, introduced by Representatives Max Miller (R-OH) and Steven Horsford (D-NV), seeks to amend the Internal Revenue Code to reflect the use of digital assets in ordinary transactions.Under the proposal, stablecoin transactions of up to $200 would be exempt from capital gains taxes if the coin is dollar-pegged, regulated under the GENIUS Act, and remains tightly priced near $1.The bill also allows taxpayers to defer recognition of income from staking and mining rewards for up to five years, rather than taxing them immediately upon receipt, addressing long-standing "phantom income" issues.Additional technical provisions would extend wash-sale rules to crypto, allow mark-to-market accounting, and adjust the tax treatment of certain digital-asset lending arrangements.
Why Does This Matter?
If enacted, this bill would significantly reduce friction to everyday crypto adoption, especially for retail users and builders. Exempting small stablecoin payments could make crypto practical for real-world use (like grocery or coffee purchases) without triggering complex tax events for minor transactions. Meanwhile, deferring taxes on staking rewards would remove a major disincentive to participate in proof-of-stake networks, potentially boosting network security and participation.
This is the first time a major federal tax draft has seriously aligned digital-asset tax policy with actual use cases, not just investment accounting, a potential game-changer for crypto mainstreaming in the U.S.
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