Last updated: October 19, 2026 · Applies to the 2026 tax year (returns filed in 2027)
In the US, staking rewards can be taxed at two different points. First, they are ordinary income when you receive them, at their dollar value at that moment. Later, when you sell or swap the rewarded coins, you pay capital gains tax on any rise in value since you received them. This guide explains when the income counts, how to value it, where it goes on your return, and what your exchange will and won’t report.
Key takeaways
- Staking rewards are ordinary income in the year you can sell or move them (“dominion and control”).
- The income equals the fair market value of the rewards at that moment.
- That same value becomes your cost basis in the rewarded coins.
- Selling the rewards later creates a separate capital gain or loss.
- Form 1099-DA does not report staking rewards; some exchanges send a Form 1099-MISC instead.
- The US Tax Court confirmed in 2026 that rewards are taxable on receipt.
When staking rewards become taxable
The IRS set out its position in Revenue Ruling 2023-14: if you stake crypto on a proof-of-stake network, directly or through an exchange, the rewards are included in your gross income in the year you gain dominion and control over them. In plain terms, that’s the moment you are able to sell, swap or transfer the rewarded coins.
- Rewards credited to your exchange account and immediately available: taxable when credited.
- Rewards that are locked for a period: taxable when the lock ends and you can dispose of them.
- Rewards you never sell: still taxable. Income doesn’t depend on cashing out.
In Paschall v. Commissioner (T.C. Memo. 2026-46), the US Tax Court agreed: Cardano rewards credited monthly to an eToro account were income in the year they were credited, because the taxpayer could sell them at any time. The court rejected the argument that rewards are new property taxed only on sale. A separate refund case brought by a Tezos validator, Jarrett v. United States, was set for trial in September 2026. Until a court rules otherwise, plan on the IRS position applying to you.
How much income to report
The income is the fair market value of each reward, in dollars, at the date and time you gained control of it. Rewards often arrive daily or even more often, so in practice you add up the value of every individual reward during the year. Exchanges usually show this in a rewards or earnings report, and crypto tax software calculates it from your transaction history using historical prices.
That value also becomes the cost basis of the rewarded coins, and each reward’s holding period starts the day after you received it. Get this right, or you will pay tax twice on the same amount: once as income and again as a gain if your software treats the rewards as having zero basis.
Worked example
Priya stakes ETH on an exchange. During 2026 she receives a total of 0.5 ETH in rewards, worth $1,500 in total at the times they were credited. In 2027 she sells those 0.5 ETH for $2,000.
| Event | Tax year | Type | Amount |
|---|---|---|---|
| Rewards received (0.5 ETH) | 2026 | Ordinary income | $1,500 |
| Basis of the rewarded ETH | — | — | $1,500 |
| Sale of the 0.5 ETH for $2,000 | 2027 | Capital gain | $500 |
If Priya is in the 22% bracket, the 2026 income costs her $330 in federal tax. The 2027 gain is short-term for rewards held one year or less and long-term for rewards held longer, so the exact rate depends on when each reward arrived and when she sells. If ETH had fallen and she sold for $1,200 instead, she would have a $300 capital loss, but the $1,500 of income from 2026 would not change.
Where staking income goes on your return
| Your situation | Where to report | Self-employment tax? |
|---|---|---|
| Investor staking through an exchange or a staking pool | Schedule 1 (Form 1040), as other income from digital assets | No |
| Running validators as a trade or business | Schedule C | Generally yes |
| Selling or swapping the rewarded coins later | Form 8949 and Schedule D | No |
Most individuals who stake through an exchange or a delegation service are investors, not businesses. Running your own validators regularly, with significant time and equipment, can turn it into a business, which brings self-employment tax but also lets you deduct related expenses. Receiving rewards also means answering “Yes” to the digital asset question on Form 1040.
What your exchange reports
Form 1099-DA covers sales and exchanges, not income. Staking rewards are not reported on it. Some exchanges issue a Form 1099-MISC for rewards that reach the reporting threshold, which is $2,000 for payments made in 2026 (it was $600 before). Many people receive no form at all for their staking income.
No form doesn’t mean no tax. Rewards are taxable from the first cent, and you should report them using the exchange’s rewards history or your tax software. When you later sell the rewarded coins, that sale may appear on a 1099-DA, sometimes without the basis you established when you reported the income. You’ll then use your records to report the correct basis, as explained in 1099-DA missing cost basis.
Special cases
- Liquid staking tokens (for example stETH or similar receipt tokens): the IRS hasn’t said whether depositing coins for a liquid staking token is a taxable swap, or how rebasing rewards are treated. Treatment varies; discuss a consistent approach with a professional if amounts are large.
- Auto-compounding rewards: rewards that are automatically restaked are still income when you receive control of them. Restaking is not a separate taxable event.
- Unstaking: withdrawing your original staked coins is not income and not a sale. You get back the same coins with the same basis.
- Slashing: coins lost to a network penalty may produce a loss, but the treatment isn’t settled; keep records of the event.
Records to keep
- A rewards report from each exchange or staking service, with the date, amount and dollar value of every reward.
- For self-custody staking, the wallet addresses and the transaction history from a blockchain explorer.
- The price source you used for valuing rewards, applied consistently.
- Any 1099-MISC you received, to make sure your reported income at least matches it.
Frequently asked questions
Do I owe tax on staking rewards if I never sold them?
Yes. The income is triggered when you can control the rewards, not when you sell. Selling later is a second, separate event.
My rewards lost value after I received them. Can I reduce the income?
No. The income is fixed at the value when you received the rewards. A later drop in price becomes a capital loss when you sell or swap the coins, which can offset other gains and up to $3,000 of ordinary income a year.
Are staking rewards taxed like interest?
They’re taxed at the same ordinary income rates, but they aren’t reported as interest on Schedule B. Investors report them as other income on Schedule 1.
For selling or swapping rewarded coins, see how crypto-to-crypto trades are taxed and how to report crypto on your taxes.
Sources
- IRS: Revenue Ruling 2023-14 (staking rewards)
- EY Tax News: Tax Court confirms staking rewards are taxable upon receipt (Paschall)
- IRS: Frequently asked questions on digital asset transactions
- IRS: Instructions for Form 1099-DA
This article is for educational purposes only and is not tax, legal or investment advice. Tax rules depend on your individual situation; consult a qualified tax professional before filing.