The U.S. Internal Revenue Service (IRS) has issued a decree stating that American citizens drawing income from cryptocurrency staking services must categorize the value of those digital assets as gross income, the moment they officially take possession of the staking reward.
IRS Clarifies Cryptocurrency Staking Income, Leaves Questions Unanswered
Under fresh tax directives from the IRS, staking rewards in cryptocurrency become taxable income within the United States immediately upon their acquisition by the taxpayer. The instant an owner is granted units of digital assets as incentives for validation, the fair market value of these rewards is to be incorporated into the taxpayer’s gross income during the taxable year in which the individual secures the staking rewards.
“The fair market value is determined as of the date and time the taxpayer gains dominion and control over the validation rewards,” the IRS discloses. The revenue directive was penned by Alina Lewandowski of the Office of Associate Chief Counsel, and notably, the IRS’s guidance omits any mention of exceptions regarding the inclusion of staking rewards in gross income.
The IRS’s fresh tax rules regarding staking have ignited lively debates across social media platforms, with many contending that the ruling leaves gaps and unanswered questions. Tax specialist Jason Schwartz expressed that the guidance prompts “several serious questions.” Specifically, the new IRS directives remain silent on issues such as slashing penalties and whether or not they may be counted as losses.
Additionally, the guidance conspicuously avoids discussing withholding for foreigners, leading Schwartz to pose the inquiry:
Does delegating to a U.S. node result in withholding for a foreigner?
Schwartz delved into the distinction between traditional staking and liquid staking, stating, “Most taxpayers take the view that U.S. tax law doesn’t ‘look through’ nonrebasing LSTs like rETH and wstETH.” He continued: “If they’re right, U.S. taxpayers who buy LSTs can turn current ordinary income into deferred capital gains. Is that the right policy result?” the tax expert inquired.
The latest revelation from the IRS coincides with a period when U.S. regulators are intensifying their efforts against staking services on a wide scale. Additionally, the IRS recently secured a victory against Kraken, compelling the cryptocurrency exchange to furnish the tax agency with transaction details on accounts that engaged in trades worth $ 20,000 or more during the tax years spanning 2016 to 2020.
What do you think about the latest tax guidance issued by the IRS? Share your thoughts and opinions about this subject in the comments section below.
Bitcoin News
Leave a Reply
You must be logged in to post a comment.