How to Handle Staking Rewards Tax Treatment in 2025
Staking Rewards Tax Calculator
Staking Tax Calculator
Calculate your tax liability for staking rewards based on IRS guidelines. Enter your rewards data to see ordinary income tax at receipt and capital gains tax when you sell.
Enter Your Staking Rewards
Tax Calculation Results
Ordinary Income Tax
Total FMV: $0.00
Tax Rate: 37%
Estimated Tax: $0.00
Capital Gains Tax (If Sold)
Capital Gain: $0.00
Tax Rate: 0% (Long-term)
Estimated Tax: $0.00
Record Keeping Log
| Date | Token | Amount | FMV (USD) | Tax Event |
|---|---|---|---|---|
| No entries yet | ||||
Key Takeaways
- Staking rewards are taxed as ordinary income at the moment you gain control over them.
- Record the fair‑market‑value (FMV) in USD on the exact receipt date for each reward.
- When you later sell or transfer the rewards, you face a capital‑gains event - short‑term or long‑term depending on the holding period.
- Hobby stakers report on Schedule 1; business‑scale stakers use Schedule C and may owe self‑employment tax.
- Keep detailed logs (date, amount, FMV, source) or use dedicated crypto‑tax software to stay audit‑ready.
Staking rewards are periodic payouts you receive for locking up a cryptocurrency on a proof‑of‑stake (PoS) blockchain or through a custodial service. The IRS treats these payouts as taxable income the moment you obtain dominion and control over them, meaning you can sell, transfer, or otherwise use the tokens.
In July 2023 the Internal Revenue Service issued Revenue Ruling 2023‑14, which clarified the tax position for crypto staking. Below we break down what the ruling means for you, how to calculate the tax, and what to do when you eventually dispose of the tokens.
When Does the Tax Hit?
The core rule is the "dominion and control" standard. As soon as you can move the reward - even if you keep it in the same wallet - the IRS says you have taxable income. The amount you must report equals the reward's fair market value (FMV) in U.S. dollars on that exact day.
Example: You earn 0.15 ETH on March 10, 2025. On that day ETH trades at $2,200. Your taxable amount is 0.15 × $2,200 = $330. If you earn rewards on a weekly basis, you repeat the calculation for each week and sum the totals for the year.
How to Calculate Fair Market Value
- Identify the receipt date and exact token amount.
- Pull the spot price from a reputable exchange (Coinbase, Kraken, or a price‑aggregation API) for that date.
- Multiply token amount by the USD price to get FMV.
- Record the figure in a spreadsheet or tax‑software tool.
Because crypto prices can swing wildly within a single day, use the closing price (UTC) or the average of high‑low for that day - but stay consistent across all entries.
Reporting the Income
How you report depends on whether staking is a hobby or a business.
- Hobby stakers list the total amount on Line 8 of Schedule 1 (“Other Income”). No self‑employment tax applies.
- Business‑scale stakers file Schedule C, deduct legitimate expenses (hardware, electricity, software), and pay self‑employment tax on net profit.
Many exchanges now send Form 1099‑MISC for staking payouts. Even if you don’t receive a 1099, you’re still required to report the income, and failure to do so can trigger an audit.
Capital Gains on Disposition
When you later sell, trade, or otherwise dispose of the reward, you trigger a separate taxable event. The gain (or loss) equals the sale proceeds minus the FMV you reported as income.
| Holding Period | Tax Rate | Typical Rate (2025) |
|---|---|---|
| ≤ 1 year (short‑term) | Ordinary income rates | 10 %-37 % |
| > 1 year (long‑term) | Long‑term capital‑gains rates | 0 %-20 % |
For example, you reported $330 of ETH income on March 10. You sell the ETH on July 15 for $400. The capital gain is $70, taxed at the short‑term rate because the holding period is under a year.
Record‑Keeping Best Practices
Because each reward has its own FMV, meticulous logs are non‑negotiable. Here’s a practical checklist you can adopt:
- Date of receipt
- Token name and amount
- Source (direct PoS node, exchange, DeFi platform)
- USD FMV on that date (include price source)
- Disposition date, proceeds, and resulting gain/loss
Tools like Blockpit or CoinTracking can import wallet data and auto‑calculate FMV, saving hours of manual work.
International Perspective (Brief)
Most developed countries echo the U.S. stance: staking rewards count as taxable income. However, timing and rates differ. In the UK, rewards are subject to income tax at receipt and capital gains tax on disposal, while Canada classifies them as “in‑kind” income with similar rules. If you owe taxes in multiple jurisdictions, double‑tax treaties may offset some liability, but you’ll still need separate records for each tax authority.
Ongoing Litigation and Future Changes
The case Jarrett v. United States (No. 22‑6023) argues that staking rewards should be treated like minerals extracted from a mine - taxed only when the owner ultimately sells the asset. Though the Sixth Circuit has not yet ruled, a favorable decision could shift the tax moment from receipt to disposition, dramatically altering planning strategies.
For now, the July 2023 guidance remains the governing rule. Tax professionals recommend staying alert for any IRS updates, especially as Congress debates broader crypto tax legislation.
Quick Compliance Checklist
- Identify every staking reward receipt date and token amount.
- Capture the USD FMV using a consistent price source.
- Report total FMV on Schedule 1 (hobby) or Schedule C (business).
- Keep 1099‑MISC forms from exchanges; reconcile them with your own logs.
- When you sell or swap tokens, compute capital gain/loss using the original FMV as cost basis.
- Retain all records for at least seven years - the IRS can audit back that far for crypto.
Frequently Asked Questions
Do I have to pay tax on staking rewards I never sold?
Yes. The IRS taxes the reward when you gain control, regardless of whether you later convert it to fiat. The tax is based on the reward’s fair market value at receipt.
Can I deduct the cost of my staking hardware?
If you run a staking operation as a business (Schedule C), hardware, electricity, and internet costs are deductible expenses. Hobby stakers cannot claim these deductions.
What if my exchange does not issue a 1099‑MISC?
You are still required to report the income. Use your own transaction logs to calculate FMV and include the total on the appropriate line of your return.
How do I handle staking rewards earned on multiple blockchains?
Treat each token separately. Record the receipt date, amount, and FMV for each chain, then sum the USD values for total ordinary‑income reporting. Disposal of each token follows its own capital‑gain calculation.
Will the pending Jarrett case change my filing this year?
Until the court issues a final ruling, the July 2023 IRS guidance remains enforceable. File according to the current rules and keep detailed records in case a retroactive amendment becomes advantageous.
Staking can boost crypto yields, but ignoring the tax side can quickly erode those gains. By tracking each reward’s fair market value, reporting the income correctly, and planning your disposals, you stay compliant and keep more of your crypto earnings.
Staking rewards count as income the moment you control them.
The IRS guidance on staking income, albeit clear on paper, introduces a cascade of practical challenges that many taxpayers overlook.
First, the definition of "dominion and control" can be ambiguous when dealing with custodial platforms that auto‑stake rewards.
Second, the requirement to record the fair‑market‑value for each micro‑reward demands a level of granularity that is rarely feasible without automated tools.
Third, many hobby stakers mistakenly assume that occasional small rewards fall below reporting thresholds, which the law expressly forbids.
Furthermore, the interaction between Schedule 1 and Schedule C reporting creates a gray area for those transitioning from hobby to business scale.
Additionally, the cost‑basis calculations for subsequent disposals become increasingly tangled as the number of reward events grows.
Moreover, the 1099‑MISC forms issued by exchanges often lack the necessary date and price breakdown, forcing taxpayers to reconstruct data from blockchain explorers.
Consequently, a diligent record‑keeping system is not just advisable-it is indispensable for audit resilience.
On top of that, the looming Jarrett litigation could retroactively shift tax timing, rendering historic filings potentially outdated.
In the meantime, aligning your accounting software with a consistent price source, such as the closing UTC price from Coinbase, mitigates discrepancies.
Equally important is the treatment of staking hardware expenses, which are deductible only if you qualify as a business on Schedule C.
Finally, the international perspective adds another layer of complexity for multi‑jurisdictional investors.
Overall, the tax landscape for staking rewards demands a proactive, systematic approach to avoid costly pitfalls.
When you receive staking payouts, you must report them immediately, because the IRS treats them as ordinary income, and the deadline for reporting is the same as your regular tax return; this means that every single token you acquire via staking should have its fair market value recorded, and you should keep a spreadsheet, or better yet, a dedicated crypto tax app.
Great breakdown! This really helps demystify the whole process, and it’s reassuring to see a clear checklist you can follow each year.