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Are You Staking Digital Assets? Here’s What You Need to Know About Reporting Rewards for Tax Purposes

Beaird Harris
March 13, 2025

If you’re involved in cryptocurrency or staking digital assets, you’ve probably wondered how your rewards are taxed. A recent IRS ruling clarified an important detail: rewards you receive from staking or other digital asset activities are considered taxable income in the year they’re credited to your account, even if your account gets frozen later.

Why This IRS Ruling Matters for You

The IRS has made it clear that for tax purposes, rewards from digital asset activities like staking are treated as income as soon as they are credited to your account. This holds true even if you can’t access the rewards right away due to something like your account being frozen.

In one example, a taxpayer had cryptocurrency rewards credited to their account from staking activities. Later, the platform where their assets were held filed for bankruptcy and froze their account. Despite not being able to access or move the assets, the IRS ruled that the rewards still needed to be reported as taxable income for that year, simply because they had been credited to the taxpayer’s account and were under their control.

Key Takeaways

When Do You Report Digital Asset Rewards?
You must report digital asset rewards in the year they are credited to your account—whether or not you’ve had access to them.
What Counts as “Received”?
The IRS considers rewards “received” as soon as they are credited to your account, even if you don’t have immediate access to them. Essentially, if the rewards are available for you to use, they count as income.
What If Your Account Is Frozen Before You Can Access Rewards?
If rewards haven’t been credited to your account before it’s frozen, you don’t need to report them as income yet. You’ll report them in the year they’re actually credited to your account and available to you.

Why This Matters for Taxpayers

Understanding how and when to report digital asset rewards is essential for staying compliant with the IRS. This clarification ensures that rewards from activities like staking are taxed in the year they’re credited, which might be different from when you can access or use them. So, if you’re involved in staking or other digital asset activities, it’s crucial to know when your rewards are considered taxable income.

If you have any questions or need help navigating this, feel free to reach out to Beaird Harris for more details on how this applies to your situation.

Adapted from article by Matthew Geiszler, Ph.D., and John McKinley, CPA, CGMA, J.D., LL.M., Journal of Accountancy

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