Your Crypto Staking Rewards Are Now Taxable, Thanks to the IRS – CryptoMode

In an unprecedented move, the United States’ highest tax authority decreed that cryptocurrency staking rewards will be reported as gross income within the year of receipt.

IRS Revenue Ruling 2023-14: Game-Changer for Digital Asset Staking

This watershed moment in crypto regulation occurred on July 31 when the Internal Revenue Service (IRS) issued Revenue Ruling 2023-14. This ruling clarified the tax treatment for income from staking digital assets, setting a new precedent for crypto investors.

A key takeaway from the ruling is the expansive interpretation of gross income. It now encapsulates income realized in any form—money, property, services, or even staking rewards.

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The implications of this new ruling are far-reaching. Cash-method taxpayers receiving cryptocurrency in exchange for validating transactions on proof-of-stake blockchains will be affected. This rule applies whether the staking occurs directly or via a centralized crypto exchange.

Fair Market Value: A Key Consideration for Crypto Staking Rewards

One notable detail in the ruling is how the fair market value of the crypto rewards should be calculated. This is to be included in the annual income and ascertained when the assets are received.

Per the IRS ruling, “dominion” is where an investor gains control and can sell, exchange, or otherwise manage cryptocurrency rewards. The fair market value is to be determined at this exact time.

Comparison with Previous Tax Regulations for Cryptocurrency

Before this ruling, crypto mining rewards were subject to income and capital gains tax. However, no specific provisions regarding staking rewards marked a pivotal change in the IRS’s approach to crypto taxation.

This tax bulletin emerges at a critical time. U.S. federal regulators, including the Securities and Exchange Commission, are increasingly scrutinizing crypto-staking service providers and exchanges for potential illegal securities sales.

Revenue Ruling 2023-14 is a turning point in crypto regulation. Crypto investors should familiarize themselves with these new regulations and consider their implications when participating in staking activities.

None of the information on this website is investment or financial advice. CryptoMode is not responsible for any financial losses sustained by acting on information provided on this website.

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About the Author: Daniel