IRS Rules Staking Rewards Are Taxable When Received

Rewards earned from staking cryptocurrency are to be included in a taxpayer’s gross income when received. For those who follow the taxation of digital assets the position taken in IRS Revenue Ruling 2023-14 comes as no surprise. The ruling formalizes the position the IRS has taken at least since the Jarrett case. The Jarretts’ argument in their case was that the rewards they earned for staking their cryptocurrency should not be taxed when they were received, but rather when those rewards were sold.

The result of the case was that the IRS issued the Jarretts their refund and the case was dismissed. While many in the crypto community took the IRS’ issuance of the refund and the subsequent dismissal of the Jarretts’ case as a win for cryptocurrency stakers, those familiar with foundational tax principles remained skeptical.