- Staking rewards are ordinary income equal to their fair market value in dollars when you gain dominion and control, meaning you can sell, transfer, or otherwise use them (Revenue Ruling 2023-14).
- That dollar value becomes your cost basis in the rewarded coins.
- Selling or swapping them later produces a capital gain or loss, measured from that basis.
- Individuals usually report rewards on Schedule 1, line 8v. Staking run as a business goes on Schedule C.
- State income taxes generally follow the federal treatment.
When Are Staking Rewards Taxed?
In Revenue Ruling 2023-14, the IRS said a cash-method taxpayer who receives staking rewards must include their fair market value in income in the tax year they gain dominion and control. The ruling covers both staking directly on a proof-of-stake network and staking through an exchange.
"Dominion and control" means you can actually do something with the rewards: sell them, send them, or exchange them. If rewards are locked and can't be moved, the timing can be later than the moment the protocol credits them. Record the date and time your rewards become available, and the price at that moment.
The Two Tax Steps, With Numbers
| Step | What happens | Tax treatment | Example |
|---|---|---|---|
| 1. Reward received | 0.1 ETH arrives when ETH is $3,000 | Ordinary income | $300 of income; basis $300 |
| 2a. Sold higher | Sold 8 months later at $4,000/ETH | Short-term capital gain | $400 − $300 = $100 gain |
| 2b. Sold lower | Sold later at $2,000/ETH | Capital loss | $200 − $300 = −$100 loss |
Each reward has its own date and basis. If you receive small rewards every few days, you build up many small tax lots, and staking-aware crypto tax software makes tracking much easier.
How to Report Staking Rewards
- Add up the dollar value of all rewards received during the year, using the price when each became available to you.
- Report the total as income. For most individuals that's Schedule 1 (Form 1040), line 8v, "Digital assets received as ordinary income not reported elsewhere." If staking is a trade or business, such as running validators commercially, report it on Schedule C, where self-employment tax may apply.
- Answer "Yes" to the digital asset question on Form 1040.
- Track basis for each reward lot, so later sales on Form 8949 are calculated correctly.
Some platforms send a Form 1099-MISC for rewards of $600 or more. When you later sell the rewarded coins through a broker, the sale appears on Form 1099-DA. You must report rewards whether or not you receive a form.
Exchange Staking vs Staking on Your Own
| Exchange staking (Coinbase, Kraken) | Self-staking / liquid staking | |
|---|---|---|
| Tax treatment | Income when received and available | Income when received and available; liquid staking tokens raise open questions |
| Records | Exchange provides a rewards history | You must export on-chain data yourself |
| Tax forms | May receive a 1099-MISC for rewards | Usually none |
| State availability | Some states restrict exchange staking | Not restricted by state licensing |
Liquid staking, where you deposit ETH and receive a token like stETH, and restaking aren't directly addressed by the IRS. Choose a reasonable, consistent treatment, document it, and discuss it with your preparer.
State Taxes on Staking Rewards
Most states start from federal income, so staking rewards are taxed as ordinary income at the state rate too: up to 13.3% in California, and nothing in Texas or Florida. Some states restrict exchange staking. Coinbase says customers in California, Maryland, New Jersey, and Wisconsin can't stake new principal, and Kraken lists the states where its onchain staking is available. See the state-by-state guide.
Common Staking Tax Mistakes
- Waiting to report until you sell. Rewards are income when received, not when sold.
- Using a zero basis. The income you reported becomes your basis. Leaving it out means paying tax twice on the same value.
- Using the wrong price. Use the price when the rewards became available to you, not the year-end price.
- Ignoring small amounts. There's no de minimis exemption, so small daily rewards add up.
Staking Tax FAQ
Are staking rewards taxable in the US?
Yes. Under Revenue Ruling 2023-14, staking rewards are ordinary income equal to their fair market value when you gain dominion and control over them. A later sale is a separate capital gain or loss.
Where do I report staking income on my tax return?
Most individuals report staking rewards on Schedule 1 of Form 1040, line 8v, "Digital assets received as ordinary income not reported elsewhere." Staking run as a business is reported on Schedule C.
What is my cost basis in staking rewards?
Your basis is the fair market value you reported as income when you received the rewards. When you sell them, your gain or loss is the sale proceeds minus that basis.
Are unsold staking rewards taxed?
Yes. Rewards are income in the year you gain control of them, even if you never sell. Selling later creates a second, separate capital gain or loss.
Sources
Written by Asad Shaikh
Founder of StartCryptoNow. Nine years researching, trading, and teaching crypto; BSCS from Virtual University of Pakistan. Every tax figure is checked against IRS and state revenue publications. Our editorial policy.