Staking Taxes Explained (2025): Income Timing & Cost Basis

When do staking rewards become taxable income? How is basis set? And what happens at sale? This guide covers US rules, practical examples, and reporting steps—so you don’t overpay (or under-report) on your staking activity.

If you’re brand-new to crypto, read our beginner’s guide first.

Staking tax basics

In the US, staking rewards are generally ordinary income when you have dominion and control over the rewards, at their fair market value in USD on that date. Later, when you dispose of those rewarded coins, you’ll realize a capital gain or loss relative to the basis you set at income recognition.

Key references: IRS Digital Assets and Rev. Rul. 2019-24 (airdrops/receipts), plus Rev. Rul. 2023-14 clarifying that staking rewards are income when the taxpayer gains control.

When do rewards become income?

Custodial staking (CEX): Income generally when rewards hit your account and are available to sell/withdraw.
Self-custody staking: Income at the block/epoch when the reward is credited to your wallet and you can transfer it.
Re-staking/auto-compounding: Still income at each accrual when you control it—even if immediately auto-staked.

How cost basis is set for rewards

The basis of rewarded coins equals the USD value recognized as income at receipt. Keep per-lot records: date/time, network, quantity, USD FMV, and tx hash. Your software should capture this; see our comparison: Crypto Tax Software 2025.

Later sale: capital gains (short vs long)

When you sell/swap/spend rewarded coins, you realize a gain/loss compared to the income basis. Holding period starts at reward receipt; ≤365 days is short-term (taxed like ordinary income), >365 days is long-term (preferential rates). IRS references: Topic 409 – Capital Gains.

Example: You receive 2.0 XYZ as staking income when XYZ = $12 → $24 ordinary income, basis $24. Months later you sell for $40 → $16 capital gain.

Liquid staking & DeFi wrappers

Liquid staking (e.g., receipt tokens): Depositing base coins and receiving a derivative token can be a taxable disposition in some interpretations. Track the swap values and any ongoing rebase income.
Rebasing tokens: Treat incremental units received as income at FMV when you control them; basis increases accordingly.
Validator expenses: If running a validator as a business, ordinary and necessary expenses may be deductible (hardware, hosting). Consult a pro; see IRS Small Business.

How to report staking income & sales

Income: Include the USD value of rewards in your gross income (often reported via software as “staking income”).
Disposals: Report sales/swaps on Form 8949 and Schedule D.
Records: Keep CSV/API exports, on-chain tx hashes, and your method (FIFO/HIFO/SpecID). See our export walk-through.