Staking rewards are taxable income
The IRS treats staking rewards as ordinary income at the fair market value when you receive them. If you earned 0.1 ETH from staking when ETH was worth $3,000, you have $300 in taxable income.
This applies whether you're staking on an exchange (Coinbase, Kraken) or directly on-chain.
When are they taxed?
Staking rewards are taxed at the moment you gain "dominion and control" over them. For most exchanges, that's when the reward appears in your account. For on-chain staking, it's when the reward is credited to your wallet.
You report this as ordinary income on your tax return, usually on Schedule 1 (Line 8z, Other Income).
What about when you sell the rewards later?
When you eventually sell staking rewards, you owe capital gains tax on any appreciation since you received them. Your cost basis is the fair market value at the time you received the reward.
Example:
You receive 1 SOL as a staking reward when SOL is $150. That's $150 in income.
Later, you sell that 1 SOL when SOL is $200. That's a $50 capital gain.
Total tax: income tax on $150 + capital gains tax on $50.
What records do you need?
For each staking reward:
Date received
Amount received (in crypto)
Fair market value at time of receipt (in USD)
The source (which validator, which exchange)
Most exchanges include staking rewards in your transaction history CSV. On-chain rewards can be tracked through blockchain explorers.
The Jarrett case
In 2024, the IRS confirmed in the Jarrett case that staking rewards are taxable as income when received. Some in the community had argued they should be treated as newly created property (not taxed until sold). The IRS disagreed.
How CryptoTaxPilot handles staking
CryptoTaxPilot automatically identifies staking rewards in your transaction history, records the fair market value at receipt, and includes them as income in your tax report. When you later sell the rewarded tokens, the cost basis is already set correctly.