Crypto Staking Taxes IRS 2026 – When Are Staking Rewards Taxable?

The IRS released Revenue Ruling 2023-14 clarifying that staking rewards are taxable income when received. This guide explains exactly what this means for ETH stakers, Coinbase staking users, and DeFi stakers.

IRS Position: Staking Rewards Are Taxable Income

In July 2023, the IRS issued Revenue Ruling 2023-14, which states:

"A cash-method taxpayer who receives new units of cryptocurrency as compensation for validating transactions on a proof-of-stake blockchain must include the fair market value of those units in gross income."

In plain English: Staking rewards are taxable ordinary income in the year you receive them.

The Jarrett Case – The Dissenting View

The IRS position was challenged in Jarrett v. United States. The Jarretts argued that newly created staking tokens are property created by the staker – not income – and shouldn't be taxed until sold. The IRS refunded their taxes initially, then reversed course.

With Revenue Ruling 2023-14, the IRS has firmly taken the position that staking rewards ARE income when received. Unless this changes through legislation or court ruling, plan accordingly.

How to Calculate Staking Income

• Taxable amount: Fair market value (FMV) of staking rewards in USD at the time they are received
• Cost basis: The FMV at receipt becomes your cost basis for later sale
• Holding period: Starts when you receive the rewards (for capital gains calculation when you eventually sell)
• Report on: Schedule 1 (Form 1040), Line 8 as "Other Income"

Common Staking Scenarios

Ethereum Staking (solo validator or via Lido/Rocket Pool)

• Each reward distribution = ordinary income at FMV
• stETH daily rebasing: Each day's increase in stETH balance = income
• When you eventually sell ETH rewards: Capital gain/loss (short or long-term)

Exchange Staking (Coinbase, Kraken, Binance.US)

• Same rules apply – rewards are income when deposited to your account
• Coinbase issues 1099-MISC for staking income over $600
• Even if below $600: Still taxable, just no 1099 issued

DeFi Staking (Curve, Convex, Lido)

• Staking rewards from protocols = ordinary income when received
• If rewards auto-compound: Taxable each time they compound into your position
• cvxCRV rewards, veToken distributions: All ordinary income at receipt

Tracking Staking Income

Staking income can be complex to track, especially with:

• Daily or even hourly reward distributions
• Multiple protocols across multiple chains
• Rapidly changing token prices

You need to record: date received, amount received, USD value at receipt – for every distribution.

Tax Strategies for Staking

• Hold rewards for 1 year: Convert ordinary income tax on receipt into long-term capital gains on eventual sale
• Offset staking income with losses: Capital losses can offset gains but NOT ordinary income (except up to $3,000/year)
• IRA staking: Some crypto IRAs allow staking – rewards grow tax-deferred or tax-free

Track All Staking Income with CoinTaxReporting

CoinTaxReporting automatically tracks staking rewards:

• Import staking history from Coinbase, Kraken, and all major exchanges
• On-chain staking reward detection for ETH, SOL, DOT, ADA and more
• USD value at receipt for every reward distribution
• Correct cost basis for future sales of staking rewards

Disclaimer: This article is for general informational purposes only and does not constitute tax advice. For individual tax advice, consult a licensed tax professional.