Crypto staking taxes 2026

Crypto staking is the process of locking up your cryptocurrency on a proof-of-stake (PoS) blockchain to help validate transactions. In return, you earn rewards, typically paid in the same token you staked.

Think of it like earning interest on a deposit, except your tokens are working to keep a blockchain network secure instead of sitting in a bank. Networks like Ethereum, Solana, and Polkadot all use proof-of-stake consensus mechanisms.

You can stake directly by running a validator node, or through services offered by exchanges like Kraken that handle the technical side for you. Either way, every time you receive staking rewards, you may be creating a taxable event.

Yes. The IRS treats staking rewards as taxable ordinary income.

Revenue Ruling 2023-14, issued in July 2023, confirmed that when you receive cryptocurrency as a reward for staking, the fair market value of those rewards must be included in your gross income for the tax year in which you gain "dominion and control" over them.

In practical terms, dominion and control means the moment they become yours, and you can sell, exchange, transfer, or use your rewards. If your rewards are subject to a lock-up period, you generally don't owe income tax until that lock-up ends and the tokens become freely accessible.

This rule applies whether you stake directly on-chain or through a platform like Kraken. It also applies no matter how small the reward, as the IRS does not set a minimum threshold for crypto income reporting.

For a broader overview of how the IRS treats digital assets, see our crypto tax guide and our primer on what is cryptocurrency.

Crypto staking can trigger two separate tax events depending on what you do with your rewards. The first happens when you receive them. The second happens if and when you sell, swap, or spend them.

When you receive staking rewards, their fair market value at the time you gain dominion and control is treated as ordinary income. You'll pay tax at your regular federal income tax rate, which in 2026 ranges from 10% to 37% depending on your total taxable income and filing status.

For example, if you receive 0.05 ETH as a staking reward and ETH is trading at $3,200 at that moment, you'd report $160 as ordinary income for that tax year.

This applies to all forms of staking rewards, whether earned through validator nodes, staking pools, or centralized exchange staking programs.

It’s worth noting that any crypto investors focus only on what happens when they sell, but staking creates a taxable event at receipt, even if the token price drops afterward. You could owe income tax on rewards that later decline in value, so it is important to understand this dynamic before you stake

When you later sell, swap, or spend your staked crypto, you trigger a second taxable event — capital gains (or losses). Your gain or loss equals the difference between your sale proceeds and your cost basis, which is the fair market value you reported as income when you first received the tokens.

• Short-term capital gains apply if you held the tokens for one year or less. These are taxed at your ordinary income tax rate.

• Long-term capital gains apply if you held for more than one year. In 2026, long-term rates are 0%, 15%, or 20% depending on your income level.

Continuing the example above: if you received 0.05 ETH valued at $160 and later sold when ETH hit $4,000 (0.05 ETH = $200), your capital gain would be $40. Hold for over a year, and that $40 qualifies for long-term capital gains treatment.

Timing matters for crypto staking taxes because income tax and capital gains tax are triggered at different moments.

Income tax is owed when you gain dominion and control. For most stakers using an exchange like Kraken, this is when rewards are credited to your account and become available for trading or withdrawal. For validators running their own nodes, it's when the tokens are unlocked and freely transferable.

Capital gains tax is owed when you dispose of the tokens. That means selling for fiat, swapping for another crypto asset, or using the tokens to buy goods or services.

Here's a practical timeline:

1. March 15: You receive 0.1 SOL as a staking reward. SOL is at $140. You report $14 as ordinary income. Your cost basis for that 0.1 SOL is now $14.

2. December 10 (same year): You sell the 0.1 SOL for $18. You owe short-term capital gains tax on $4 (held less than one year).

3. Alternative, March 20 (following year): You sell the 0.1 SOL for $18. You owe long-term capital gains tax on $4 (held more than one year).

If your rewards are locked during an unbonding period, income recognition is generally delayed until the tokens become accessible. Once you can transfer or sell them, the clock starts, whether or not you actually do.

Under current IRS guidance, all proof-of-stake rewards follow the same framework, ordinary income at receipt, capital gains at disposal. But a few nuances are worth knowing.

Liquid staking tokens (LSTs) like stETH or mSOL add complexity. When you stake ETH through a liquid staking protocol and receive stETH in return, some tax professionals argue this swap may not be a taxable event, since you're receiving a representation of your staked asset rather than a new one. The IRS hasn't issued definitive guidance on LSTs, so conservative reporting is advisable.

Staking through a pool or exchange doesn't change the tax treatment. Whether you stake through Kraken or a decentralized validator pool, your rewards are taxable income when credited to your account.

Fees paid to staking pool operators may be deductible in certain circumstances, though the 2017 Tax Cuts and Jobs Act (TCJA) suspended miscellaneous itemized deductions for individuals. This suspension was made permanent by the One Big Beautiful Bill Act (OBBBA), signed into law in July 2025, so individual investors can no longer deduct staking fees this way.

Self-employment considerations. If you run your own validator node as a trade or business, you may need to report staking income on Schedule C rather than Schedule 1. This subjects the income to self-employment tax (an additional 15.3% for Social Security and Medicare) but also opens up deductions for hardware, electricity, and other operational costs.

Calculating crypto staking taxes requires tracking two things for every reward event: when you received it, and what it was worth at that moment. Here's the step-by-step process:

1. Export your staking reward history from every platform or wallet where you earned rewards. Include timestamps, token amounts, and transaction IDs.

2. Determine the fair market value of each reward at the time you gained dominion and control. Use a consistent pricing source; don't switch between aggregators mid-year.

3. Sum the USD values of all rewards received during the tax year. This total is your staking income, reported as ordinary income.

4. Create cost basis lots for each reward event. Every time you receive a reward, it creates a new "lot" with its own basis and holding period.

5. Track disposals separately. When you sell, swap, or spend staked tokens, match the disposal against the corresponding lot to calculate your gain or loss.

Situation: Alex, an active crypto trader, stakes 5 ETH through Kraken in 2025. Over the course of the year, Alex receives staking rewards totaling 0.2 ETH across 50 separate reward events.

Approach: Alex records each reward at its fair market value when credited. The price of ETH at the time of each reward ranged from $2,800 to $3,500. Alex totals the combined value at $640 and reports it as "Other Income" on Schedule 1. This $640 also becomes the blended cost basis across 50 individual lots.

Outcome: In January 2026, Alex sells all 0.2 ETH for $720. Since some lots were held for less than a year and others for more, each lot must be evaluated individually. Lots held over a year qualify for long-term capital gains rates; shorter-held lots fall under short-term rates. Total capital gain: $80.

Key Lesson: Even though the total gain was modest, Alex needed to track 50 separate lot entries. Crypto tax software or a detailed spreadsheet is essential when staking generates frequent, small rewards throughout the year.

Here are the main IRS forms you'll encounter when reporting staking income and any subsequent capital gains:

Form 1040 (Digital Assets Question): Since 2020, the IRS has required all taxpayers to answer whether they engaged in any digital asset transactions during the tax year. If you earned staking rewards, the answer is "Yes."

Schedule 1 (Additional Income): Most individual stakers report their rewards here as "Other Income" on Line 8z. This is where you list the total fair market value of rewards received during the year.

Schedule C (Profit or Loss from Business): If you operate a staking validator as a trade or business, your staking income goes here instead of Schedule 1. This subjects the income to self-employment tax but allows business expense deductions.

Form 8949 (Sales and Other Dispositions of Capital Assets): When you sell, swap, or spend staked crypto, each transaction is reported here. You'll list the date acquired, date sold, proceeds, cost basis, and gain or loss for each lot.

Schedule D (Capital Gains and Losses): This form summarizes the totals from Form 8949 and determines your net capital gain or loss for the year.

Form 1099-DA (Digital Asset Proceeds from Broker Transactions): New for 2025 transactions (issued in early 2026), this form is sent by custodial brokers like Kraken. For 2025, it reports gross proceeds only. Starting with 2026 transactions, brokers must also report cost basis for covered digital assets, meaning assets acquired and held within the same broker account on or after January 1, 2026.

Here's how to report your staking rewards step by step:

1. Gather your records. Download your staking reward history and transaction history from all platforms. On Kraken, you can export your rewards data directly from your account.

2. Calculate your total staking income. Add up the fair market value of all rewards received during the tax year. This is your ordinary income amount.

3. Answer "Yes" to the digital assets question on Form 1040.

4. Report staking income on Schedule 1 (Line 8z, "Other Income"), or on Schedule C if staking is your trade or business.

5. Report any sales of staked tokens on Form 8949. List each disposal with the date acquired (when you received the reward), date sold, proceeds, cost basis, and gain or loss.

6. Carry totals to Schedule D to calculate your net capital gain or loss.

7. Reconcile with Form 1099-DA if you received one from your exchange. Keep in mind that your 1099-DA may not include cost basis for 2025 transactions; you're responsible for tracking this yourself.

8. File by the deadline. The tax return filing deadline for the previous tax year is April 15 of the following year.

• Assuming staking rewards aren't taxable until sold. This is the most common error. The IRS taxes rewards at receipt, not at sale.

• Failing to report small or frequent rewards. There's no minimum reporting threshold. Even $1 in staking income is technically taxable.

• Using inconsistent pricing sources. Switching between different price feeds mid-year can create discrepancies that are hard to reconcile during an audit.

• Forgetting that swaps trigger capital gains. Trading your staked ETH for another token counts as a taxable disposal, even if you never convert to fiat.

• Not tracking per-wallet cost basis. As of 2025, the IRS requires you to maintain cost basis records on a per-wallet or per-account basis, not as one combined pool.

• Overlooking the Form 1040 digital assets question. Answering "No" when you've earned staking rewards is inaccurate and could trigger IRS scrutiny.

• Hold staked tokens for over one year before selling. This qualifies your gains for long-term capital gains rates (0%, 15%, or 20%), which are significantly lower than ordinary income rates for most taxpayers.

• Harvest tax losses. If some of your staked tokens have dropped below their cost basis, selling them can offset gains elsewhere in your portfolio. Be mindful of wash sale rules: while the IRS hasn't explicitly applied wash sale rules to crypto as of early 2026, proposed legislation could change this.

• Use specific identification for cost basis. Rather than defaulting to FIFO (first-in, first-out), identifying which specific lots you're selling can help you optimize for the most favorable tax treatment.

• Consider staking in a tax-advantaged account. Some self-directed IRAs now support crypto. Staking within an IRA could defer or eliminate tax on rewards, depending on the account type.

• Keep detailed records throughout the year. Don't wait until tax season. Export your staking data quarterly and reconcile as you go.

• Consult a tax professional. Crypto tax rules are still evolving. A CPA experienced with digital assets can help you identify opportunities and stay compliant.

Kraken staking supports a range of proof-of-stake tokens, with rewards paid directly to your account. You can start with no minimum for many supported assets, and flexible staking options let you unstake at any time.

For tax reporting, Kraken provides downloadable staking reward history with timestamps and USD values, giving you the data you need to calculate your income and prepare your filings. US customers will also receive Form 1099-DA for applicable transactions.

To learn more about how different types of crypto rewards are treated by the IRS, see our guide on how crypto rewards are taxed. You can also explore all earning options through Kraken Earn.