The IRS classifies staking rewards and other cryptocurrency earnings as "other income," meaning they are subject to taxation in the year they are realized rather than when they are sold or traded.
It's important to understand that the moment staking rewards are made available to you for transfer, they become taxable, even if you decide not to convert them into fiat immediately.
Coinbase issues Form 1099-MISC for users who earn more than $600 in rewards, which is required for tax reporting purposes.
If you conduct cryptocurrency activities classified as a business, you will need to report your Coinbase rewards on Schedule C; otherwise, use Schedule 1 for reporting as miscellaneous income.
The term "staking" refers to the process of participating in a proof-of-stake blockchain network and earning rewards for helping to secure the network.
In some cases, rewards also qualify for capital gains taxes if sold, meaning you will need to calculate the fair market value of those rewards on the date they were received.
Tax reporting can be complex, especially if you engage in multiple transactions, as each transaction may affect your overall tax liability.
Some cryptocurrency wallets offer the ability to track your staking rewards and provide you with the data needed for accurate tax reporting.
If you haven't received a Form 1099 but meet the income threshold, it’s still your responsibility to report your earnings to the IRS, as Coinbase is required to report certain data regardless.
The dollar amount that staking rewards are valued at for taxation is based on the fair market value at the time they are received.
The IRS has issued guidance on cryptocurrency taxation, stressing that taxpayers must keep accurate records of all transactions, including dates, amounts, and the value at the time of each transaction.
Failures in accurate reporting might lead to penalties or audits, underscoring the importance of proper bookkeeping in cryptocurrency dealings.
Certain states have adopted their own regulations on cryptocurrency taxes, which can affect how you report your Coinbase rewards and pay your state taxes.
Crypto exchanges often provide tax reporting tools or downloadable transaction history files, which can simplify the process of compiling income for tax purposes.
In 2025, enhanced reporting measures are implemented where exchanges, including Coinbase, need to report all capital gains and losses to the IRS through Form 1099-DA.
Cryptocurrencies can be subject to both ordinary income and capital gains taxes, depending on whether they are treated as income (such as staking rewards) or gains from the sale of assets.
Some users may confuse crypto rewards with gifts or non-taxable income; however, rewards are treated as taxable income and require proper reporting.
Tax laws regarding cryptocurrency can change, so staying informed about current guidelines and tax obligations is crucial for compliance.
Using tax software can streamline the process; however, understanding the underlying principles of tax reporting for crypto can enhance accuracy and compliance.
It’s advisable to consult a tax professional, especially if your crypto transactions are complex, to ensure you're meeting all reporting requirements appropriately.