Key Takeaways
- BNB staking rewards are taxed as ordinary income based on their fair market value upon receipt, which can range from 10% to 37% depending on your tax bracket.
- You also pay capital gains tax when you dispose of your BNB staking rewards, depending on how its price changed since you originally received it.
How are my BNB staking rewards taxed?
When you receive BNB staking rewards, it’s considered income subject to ordinary income tax.
Your income is calculated based on the fair market value of BNB at the time you received it. You’ll be taxed at your ordinary income rate, which ranges from 10% to 37% depending on your total income.
Do I have to pay capital gains tax on staking rewards when I sell?
When you sell your staking rewards, you’ll owe capital gains tax based on how the price of your crypto has changed since you originally received it.
It’s important to note that you are not double-taxed on the same income. You pay income tax on the value of your staking rewards at the time of receipt. Then, you incur a capital gain or loss based on your profit/loss after receipt.
How much are capital gains taxed?
If you hold your staking rewards for more than a year, that's long-term capital gains (0%, 15%, or 20% depending on income). If you hold less than a year, your profits are considered short-term capital gains taxed at your ordinary income rate (10-37%).
When are staking rewards taxable?
You owe income tax on your BNB staking rewards even if you never sell them or withdraw them to an external wallet.
The IRS uses a concept called ‘dominion and control’ to determine taxation for staking rewards. Under ‘dominion and control’, your staking rewards count as received whenever you are freely able to withdraw and trade them.
How is auto-compounding taxed?
Some staking programs automatically reinvest your rewards (auto-compounding). These rewards are taxed as income.
If you earn 0.01 BNB daily through auto-compounding, you technically have 365 taxable events per year. Each one needs to be reported based on its USD value on the day it was received.
Do I have to report my staking rewards to the IRS?
Yes, you must report all staking rewards to the IRS, regardless of the amount. There's no minimum threshold for reporting crypto income.
Even if you only earned $10 in BNB staking rewards, it should be reported to the IRS.
Will I receive a 1099 form for staking rewards?
Binance.US and other exchanges report your staking income to the IRS via Form 1099-MISC. You will receive this form if you earned more than $600 of staking income during the year.
Remember, you are required to report your income from staking and other sources even if you didn’t receive a 1099 form.
What happens if you don’t report staking rewards to the IRS?
Failing to report staking rewards is considered tax evasion and can result in penalties, fines, and even an audit.
How do I report BNB staking rewards to the IRS?
You report BNB staking rewards as "Other Income" on Schedule 1 of your Form 1040, and later report capital gains or losses when you sell on Form 8949.
To accurately report your taxes, you’ll have to keep track of every time you earn, sell, or otherwise dispose of staking rewards.
How CoinLedger can help
Tracking BNB staking rewards manually is overwhelming, especially when you're receiving daily distributions. CoinLedger can help.
CoinLedger integrates with hundreds of wallets and exchanges including Binance.US. The platform imports your transactions and gives you a complete record of your income and capital gains.
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