Crypto Staking Taxes 2025: IRS Rules and Compliance Tips

Staking has become a go-to strategy for crypto holders looking to earn passive income without selling their assets. It plays a critical role in securing Proof-of-Stake networks like Ethereum, Solana, and Avalanche. But what many investors overlook is that staking rewards are also taxable.

The IRS has tightened its grip on crypto activity over the past few years, and 2025 marks a turning point. New forms, wallet-level reporting rules, and clearer definitions of what counts as taxable income are reshaping how staking is treated. Anyone earning staking rewards now has to track not just what they receive, but when and how they receive it. IRS scrutiny is increasing, and that means every staking event, no matter how small, has potential tax implications.

This article explains how staking is taxed in the U.S. in 2025, what rules apply, and what steps you can take to stay compliant.

Are Staking Rewards Taxable?

Yes. The IRS treats staking rewards as taxable income the moment you gain control over them. This applies whether the rewards are deposited directly into your wallet or made available to claim through an exchange or staking protocol.

The key term is “dominion and control,” which means you can sell, transfer, or use the tokens without restriction. According to Revenue Ruling 2023-14, that’s the moment when income is recognized; not when the reward is created, but when it becomes accessible.

The fair market value (FMV) of the tokens at that time is what gets reported as ordinary income. There’s no minimum threshold. Even if you earn a few dollars’ worth of rewards, you’re expected to include it in your tax return.

When Do You Pay Taxes on Staking?

When You Receive Rewards (Income Tax)

Staking rewards are taxed as ordinary income at the moment you gain control over them. This means when the tokens hit your wallet or become available to withdraw or trade, you’re required to report their fair market value in U.S. dollars.

For most individuals, this income goes on Form 1040 Schedule 1 under “Other Income.” If you’re running a staking validator or operating as a business, you may instead report on Schedule C, which allows you to deduct expenses related to hardware, hosting, or other operational costs.

When You Sell Rewards (Capital Gains)

Once you sell, trade, or spend the staking rewards, that’s a separate taxable event. You’ll owe capital gains tax on the difference between the price when you received the tokens and the price at disposal.

Use Form 8949 and Schedule D to report these gains or losses. If you held the tokens for less than a year, gains are taxed at short-term rates. Holding them for more than a year qualifies for long-term capital gains rates, which are usually lower.

Key IRS Forms for 2025

Tax reporting for staking now involves multiple forms depending on how and when you interact with your rewards. Below is a breakdown of the main IRS forms to be aware of in 2025:

These new requirements signal a shift toward stricter enforcement and more granular reporting. Accurate records by wallet and transaction type will be essential going forward.

Special Cases

Some staking rewards remain locked for a period before they can be accessed or transferred. In these cases, the IRS does not consider the tokens taxable until you gain full control. You recognize income when the lock-up ends and the tokens become available

Protocols like Lido and Jito offer liquid staking tokens (e.g., stETH) that represent staked assets. According to a legal memo from Jito Labs, minting or redeeming LSTs may not trigger a taxable event in the U.S. Instead, tax would apply when those tokens are sold or used. However, this view hasn’t been formally adopted by the IRS and should be treated with caution.

If you participate in a staking pool, your share of the rewards is still taxable income. You’re responsible for reporting the fair market value of the rewards when they’re distributed. Any fees paid to the pool may be deductible if you’re staking as part of a business.

Global Comparison

Staking taxes vary by jurisdiction, but the core principle is usually the same: rewards are taxed when received, and again if disposed at a different value. Here’s how three major countries handle it:

Starting in 2027, the OECD Crypto-Asset Reporting Framework (CARF) will allow tax authorities to share data across borders. This will increase scrutiny on staking activity involving foreign platforms or wallets.

Compliance Tips

Staying compliant with staking tax rules in 2025 requires accurate tracking and proactive planning. The IRS now expects more detailed records, and failure to report even small rewards can trigger penalties. Here are key areas to focus on:

Tax Optimization Strategies

While staking rewards are taxable, there are several ways to legally reduce your overall liability. These strategies apply whether you’re an individual investor or operating a staking business.

Final Thoughts

Staking rewards come with two tax layers: income tax when you receive the tokens, and capital gains tax if you later sell them at a different price. The IRS has made it clear that staking is no longer in a regulatory gray zone. Forms like 1099-DA and wallet-by-wallet accounting are raising the bar for how detailed your records need to be.

For more complex setups, or if you’re unsure about how past rewards were handled, it’s worth consulting a crypto tax professional. In 2025, staying compliant is about knowing what to report, and how.

Frequently Asked Questions (FAQ)

Do you pay tax on crypto staking rewards?

Yes. Staking rewards are taxed as income when you gain control over the tokens. You’ll owe income tax based on their fair market value at the time they become accessible.

Do I need to report staking income under $600?

Yes. The IRS does not apply a minimum threshold to crypto income. Even small rewards must be reported, whether or not you receive a 1099 form from the platform.

Is crypto staking taxed twice?

Not exactly. You pay income tax when you receive the rewards, and capital gains tax if you later sell them at a different price. These are two separate events, each with its own tax implications.

Which IRS forms do I use to report staking income?

Staking income typically goes on Form 1040 Schedule 1 as “Other Income.” If you dispose of the tokens, use Form 8949 and Schedule D to report capital gains or losses. If you stake as a business, use Schedule C.

What is “dominion and control” in crypto taxes?

“Dominion and control” refers to the moment you can freely transfer, sell, or use your staking rewards. That’s when the IRS considers the income to be taxable.

Are liquid staking tokens like stETH taxable?

It depends. Some legal interpretations suggest that minting or redeeming liquid staking tokens might not be a taxable event, but this hasn’t been officially confirmed by the IRS. Tax may still apply when you sell or use those tokens.

Do staking pool rewards have to be reported?

Yes. Your portion of the pool’s rewards is taxable income, based on its fair market value at the time of distribution. Any pool-related fees may be deductible if you’re staking as part of a business.