How Do Staking Taxes Work For Crypto? (2025)

If you earned staking rewards this year, you owe money to the IRS.

In this guide, we’ll break down everything you need to know about how staking rewards are taxed. We’ll answer a few commonly asked questions about staking taxes and show you how you can report your staking income on your tax return in minutes. 

What is staking? 

Staking typically refers to participating in a Proof of Stake (PoS) blockchain’s governance process. 

In a PoS blockchain, cryptocurrency stakers temporarily lock their cryptocurrency to help validate transactions and maintain the security of the blockchain. In return, stakers receive cryptocurrency rewards — allowing them to earn a passive income! 

Staking can also refer to earning rewards from your cryptocurrency on a DeFi protocol. Certain protocols will give you rewards for adding liquidity to the platform. 

How is staking taxed? 

The IRS has released guidance that staking rewards are considered income based on their fair market value at the time of receipt. 

Once you subsequently dispose of your cryptocurrency rewards, you’ll incur a capital gain or loss depending on how the price of your staking rewards changed since you originally received it. 

The tax rate Cara will pay on this income depends on her tax bracket and holding period. 

When should I recognize income from my staking rewards? 

As discussed earlier, staking rewards are recognized as income based on the fair market value of your crypto at the time of receipt. However, in some situations, it can be unclear when ‘time of receipt’ takes place.

For example, many investors who earn staking rewards are unsure whether they should recognize income when the rewards are earned or when they withdraw their rewards into a personal wallet. 

To better understand when staking rewards are considered taxable, it’s important to understand the concept of ‘dominion and control’ (as described below).

What is ‘dominion and control’ and how does it relate to staking taxes?

Staking rewards are considered ‘received’ when investors have dominion and control over their coins and can freely sell and trade them. 

Investors have ‘dominion and control’ as soon as they have the ability to withdraw their staking rewards. In this case, the rewards may be considered “constructively” received. 

In other words, you’ll recognize income regardless if the coins are in your personal wallet or are in the hands of a third-party as long as you have the ability to withdraw them.

Are there any situations where staking rewards are non-taxable? 

In cases where rewards cannot be withdrawn, it’s reasonable to take the position that your staking rewards are non-taxable. 

For example, some platforms gave users the ability to stake their Ethereum but restricted withdrawals until the Ethereum Merge was completed. In cases like these, you would recognize income only when you have ‘dominion and control’ over your coins — in other words, when you have the ability to freely withdraw your crypto. 

How is DeFi staking taxed?

In most cases, DeFi staking income is subject to income tax. 

However, some DeFi staking protocols leverage crypto-to-crypto swaps to allow users to stake/unstake crypto. It’s possible that these transactions may be subject to capital gains tax, like other crypto-to-crypto swaps. 

For more information, check out our guide to DeFi taxes. 

Are staking rewards taxed twice?

If you dispose of your staking rewards in the future, your gains will be subject to capital gains tax.

You may be required to pay income tax on your crypto upon receipt and capital gains tax upon disposal. However, it’s important to note that you won’t be taxed on the same profits twice. 

When you dispose of cryptocurrency, you will incur a capital gain or loss based on how the price of your staking rewards has changed since you originally received them. Technically, you won’t pay capital gains tax on the same income.
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