![]() ![]() In cases like these, you would recognize income only when you have ‘dominion and control’ over your coins - in other words, when you have the ability to freely withdraw your crypto. In cases where rewards cannot be withdrawn, it’s reasonable to take the position that your staking rewards are non-taxable.įor example, some platforms gave users the ability to stake their Ethereum but restricted withdrawals until the Ethereum Merge was completed. Are there any situations where staking rewards are non-taxable? As a result, it’s likely that you recognize income regardless if the coins are in your personal wallet or are in the hands of a third-party. It’s reasonable to assume that the IRS will claim that investors have ‘dominion and control’ as soon as they have the ability to withdraw their staking rewards - the rewards may be considered “constructively” received. ![]() Tax experts believe that staking rewards are considered ‘received’ when investors have dominion and control over their coins - or in other words, they can freely trade and sell their staking rewards. What is ‘dominion and control’ and how does it relate to staking taxes? However, it can be unclear when ‘time of receipt’ takes place in certain situations.įor example, many investors who earn staking rewards are unsure whether they should recognize income when the rewards are earned or when they withdraw their rewards into a personal wallet. When should I recognize income from my staking rewards?Īs discussed earlier, staking rewards are recognized as income based on the fair market value of your crypto at the time of receipt. Certain protocols will give you rewards for adding liquidity to the platform - typically in the form of transaction fees from other customers! Staking also refers to committing your cryptocurrency to a DeFi protocol. Staking is considered an eco-friendly alternative to cryptocurrency mining and allows cryptocurrency holders to earn passive income while supporting the blockchain ecosystem. In return, participants are rewarded with additional crypto for validating transactions. This can be done by locking up a certain amount of cryptocurrency as collateral. ![]() Staking typically refers to participating in a Proof of Stake blockchain’s governance process. We’ll answer a few commonly asked questions about staking taxes and show you how you can report your staking income on your tax return in minutes. In this guide, we’ll break down everything you need to know about how staking rewards are taxed. If you earned staking rewards this year, you owe money to the IRS. Income is recognized when you have ‘dominion and control’ over your staking rewards.Crypto received from staking rewards is taxable income at the fair market value upon receipt. ![]()
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