Staking is a popular way to earn passive income with your crypto. But before you celebrate those rewards, know this: the IRS wants their cut. Here's exactly how staking rewards are taxed, according to the latest IRS guidance.
The Golden Rule: Revenue Ruling 2023-14
In May 2024, the IRS issued Revenue Ruling 2023-14 — the definitive guidance on staking rewards taxation. Here's what you must know:
📜 The Ruling
Staking rewards are taxable as ordinary income at their fair market value on the date they are received. The value becomes your cost basis for future capital gains calculations.
Two Tax Events
Staking creates two separate tax events:
Event 1: Receipt
When staking rewards hit your wallet, they're taxed as ordinary income.
Report on Schedule 1, Line 8z
Event 2: Sale
When you sell, you'll pay capital gains on any increase from your cost basis.
Report on Schedule D / Form 8949
Example: Ethereum Staking
Scenario: You stake 10 ETH. Over the year, you receive 0.5 ETH in staking rewards.
Event 1 — When received (ordinary income):
- 0.5 ETH received, worth $2,000 at the time
- Report $2,000 as ordinary income
- Your cost basis in the 0.5 ETH = $2,000
Event 2 — When you sell:
- Later, sell 0.5 ETH for $2,500
- Capital gain = $2,500 - $2,000 = $500
Staking on Different Chains
The same rules apply regardless of which chain you stake on:
| Chain | Token | Tax Treatment |
|---|---|---|
| Ethereum | ETH (via Lido, Rocket Pool) | Ordinary income |
| Solana | SOL (via Jito, Marinade) | Ordinary income |
| Polygon | MATIC | Ordinary income |
| Cardano | ADA | Ordinary income |
| Polkadot | DOT | Ordinary income |
Liquid Staking Tokens (LSTs)
When you stake ETH through Lido, Rocket Pool, or similar protocols, you receive a liquid staking token (stETH, rETH). Here's the tax nuance:
- Staking rewards — Ordinary income when received (as more LST)
- LST price appreciation — Capital gains when you sell
- Converting LST back to ETH — Generally non-taxable (same asset)
What to Track
For every staking reward, record:
- Date received — Exact date rewards hit your wallet
- Amount received — Number of tokens
- USD value — Fair market value on that date (your ordinary income)
- Cost basis — That same USD value
DeFi Staking vs. Native Staking
There are two types of "staking" in crypto:
- Native Proof of Stake — Validating on-chain, rewards from protocol (ETH, SOL, ADA)
- DeFi Lending/Yield — Lending your tokens for interest (Aave, Compound)
Both are generally taxed as ordinary income under Rev. Rul. 2023-14.
How Arthur Labs Handles Staking
- Detects staking rewards across all 12 chains
- Calculates FMV at exact receipt time
- Classifies as ordinary income (Schedule 1)
- Sets cost basis for future capital gains
- Includes in 1099-DA with correct DTIF code (08)
Disclaimer: This article is for educational purposes only. Based on IRS Revenue Ruling 2023-14. Consult a qualified tax professional.