The IRS has published official guidance on how staking rewards are taxed. In Revenue Ruling 2023-14 (July 2023), the IRS confirmed that if you stake cryptocurrency and receive additional tokens as validation rewards, you must include the fair market value of those rewards in your gross income for the year in which you gain "dominion and control" over them. In plain terms, that means the rewards are taxed as income at the point you are able to sell, exchange, or otherwise dispose of them.
Fair market value is generally taken to mean the price of the token in USD on a major cryptocurrency exchange at the time you gain control of the rewards. If your rewards are locked and you cannot transfer or sell them, the income generally arises when that restriction lifts and you gain control.
This mirrors the IRS's earlier guidance on hard forks: the cryptocurrency received is recorded as income at fair market value when received.
Following this, when you later dispose of the rewards, the value you recorded as income becomes your cost basis for the disposal calculation. Check out our article on cryptocurrency fork taxation in the US, or the IRS's digital assets pages for more information.
Some situations are still not directly addressed by the ruling, such as staking through an exchange or delegating to a validator, although the same income-at-receipt principle is generally applied. We recommend consulting a certified tax professional if you have significant staking income, and keeping a record of how and why you reported it.
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Disclaimer: This article is intended as an informative piece. This is not accounting or tax advice. Please speak to a qualified tax professional about your specific circumstances before acting upon any of the information in this article.