How to Pay Taxes on Crypto Staking Rewards: A Clear 2025 Guide

Crypto staking concept with coins and blockchain

Crypto staking has become a popular way to earn passive income in the crypto world, but it comes with important tax responsibilities. If you're earning staking rewards, understanding how to report and pay taxes on these earnings is crucial to avoid IRS penalties and audits. In this article, we break down everything you need to know about paying taxes on crypto staking rewards in 2025, explained clearly and practically.

What Are Crypto Staking Rewards?

Staking involves locking up your cryptocurrency to support the network's operations—often on proof-of-stake (PoS) blockchains—and, in return, earning rewards paid in crypto tokens. These rewards are similar to earning interest or dividends in traditional finance but come with unique tax rules.

Are Crypto Staking Rewards Taxable?

Yes, staking rewards are taxable as ordinary income at the moment you gain control over them. The IRS classifies the receipt of staking rewards as a taxable event, meaning you owe income tax on the fair market value (FMV) of those rewards at the time you receive them in your wallet or exchange account. This applies whether you stake directly on a blockchain or via a third-party platform.

This tax treatment was clarified in IRS Revenue Ruling 2023-14, which states you must report the rewards as income in the year you have "dominion and control" over the tokens—i.e., when you can freely transfer, sell, or spend them.

How to Calculate Taxes on Staking Rewards

Calculating your tax liability starts with determining the FMV of the staking rewards in your local currency on the exact date you receive them. For example, if you receive 0.1 ETH on March 1, 2025, you find the USD price of 0.1 ETH on that day and report that amount as ordinary income.

Step-by-step:

Track each reward receipt date: Staking rewards might be paid frequently (daily, weekly, monthly).
Record FMV in fiat currency at receipt: Use reliable crypto price data sources.
Sum the FMV values for the tax year: This total is your taxable income from staking.

Even if you don’t sell or convert your staking rewards, you still owe income tax on their value as soon as you receive them.

Reporting Crypto Staking Rewards on Your Taxes

For U.S. Taxpayers

Income Tax: Report the total FMV of your staking rewards as "Other Income" on Form 1040 Schedule 1 or Schedule B (if reported as interest). This amount contributes to your gross income for the year.
Capital Gains Tax: If you later sell or trade your staking rewards, you must report the sale on Form 8949 and Schedule D, calculating gains or losses based on the difference between the sale price and the FMV you reported as income when you received the rewards.

Example:

If you earned 0.5 ADA worth $100 when received and later sold that ADA for $150, you pay:

Income tax on $100 when received.
Capital gains tax on $50 when sold.

What Forms to Use:

Tax Type	Form(s)	Notes
Income from Staking	Form 1040 Schedule 1 or Schedule B	Report FMV of rewards as ordinary income
Sale of Staking Rewards	Form 8949 and Schedule D	Report gains/losses on disposal

Tips for Keeping Track of Staking Taxes

Use Crypto Tax Software: Tools like Koinly, CoinTracking, or CoinLedger can automate tracking rewards, calculating FMV, and generating tax reports, saving you from tedious manual calculations.
Keep Detailed Records: Maintain records of dates, amounts, and FMV of all staking rewards.
Watch for 1099 Forms: Some exchanges issue Form 1099-MISC or the new 1099-DA for reporting staking income. Use these to verify your records.

Are There Differences Based on Where You Live?

Tax laws vary globally. While the U.S. taxes staking rewards as ordinary income upon receipt, other countries may have different rules or tax rates. Always check your local tax regulations or consult a tax professional experienced in cryptocurrency.

What If You Stake Through a Third Party?

Whether you stake directly on a blockchain or through a third-party service (like a centralized exchange), the IRS considers the receipt of rewards taxable income at the time you gain control over the tokens. You must report the rewards in the year you receive them, regardless of staking method.

Capital Gains Tax on Selling Staking Rewards

Once you sell, trade, or spend your staking rewards, you trigger a capital gain or loss event. The capital gain is the difference between the sale price and the FMV you reported as income when you received the tokens. Holding the tokens for more than one year before selling may qualify you for long-term capital gains rates, which are generally lower than short-term rates.

Common Questions About Crypto Staking Taxes

Do I pay taxes if I don’t sell staking rewards?
Yes, income tax is due when you receive the rewards, even if you hold them without selling.
Can I deduct expenses related to staking?
If you are staking as a business or self-employed activity, you may report income on Schedule C and deduct related expenses (equipment, fees).
What if I reinvest staking rewards?
Reinvesting doesn't avoid income tax. The initial receipt of rewards is taxable regardless of whether you immediately use or reinvest them.

Final Thoughts

Paying taxes on crypto staking rewards in 2025 means recognizing your staking income at the fair market value when you receive it and reporting it as ordinary income on your tax returns. Keep thorough records, consider using crypto tax software, and be prepared to report capital gains when you sell or dispose of staking rewards later.

Staying compliant with these rules helps you avoid penalties and audits while enjoying the benefits of staking your crypto assets responsibly.

Tax documents and cryptocurrency coins on desk