tldr; House Republicans are urging the IRS to revise tax rules on crypto staking rewards before the 2025 tax year. They argue that staking rewards should be treated as new capital property and taxed only when sold, rather than as taxable income upon receipt. This push aims to support the crypto industry’s growth and maintain U.S. leadership in the sector. The effort seeks to reverse a 2023 IRS rule and potentially ease the path for future crypto tax legislation. The Treasury has yet to act on these proposed changes.
*This summary is auto generated by a bot and not meant to replace reading the original article. As always, DYOR.
MariachiArchery on
>House Republicans are pushing the IRS to scrap a 2023 rule that taxes all crypto staking rewards as income.
>They argue staking rewards, which are generated by proof-of-stake networks, should only be taxed when sold off.
This does need a rework. Let’s say I earn .1 ETH staking this year, with a cost basis at $3000 ETH. What happens now is I pay ordinary income tax on $300. That is usually a tax rate of 10-37%. Let’s assume my tax rate is 22% earning $100,000. That means I need to pay $66 in taxes.
Now, let’s assume ETH rallies to $4000 before year end, and on December 31st, I sell that .1 ETH. My cost basis on that is $300, I sold for $400, I now owe an additional 22% on this $100. Now, this isn’t really a problem, because my tax rate is still the same, 22%. The problem is when ETH goes down.
Let’s my .1 ETH goes to $200 by year end. Now, I still how this $66 because I earned staking rewards, but now, because my ETH is only worth $200, I’m essentially paying a 34% tax rate, which is a higher tax bracket than what I am actually in. Remember, the price of ETH doesn’t matter here. What matters, is the price when the reward was earned.
Apply a tax when the reward is sold. Simple. Also, we need to find a better way to handle cost basis. My vote, would be to let us assign cost basis as either the price of the reward when it was earned, or, the price of the reward when it was sold.
Asset goes up in value? Use the price when the reward was earned for your cost basis.
Asset goes down in value? Use the price when the asset was sold for the cost basis.
2 Comments
tldr; House Republicans are urging the IRS to revise tax rules on crypto staking rewards before the 2025 tax year. They argue that staking rewards should be treated as new capital property and taxed only when sold, rather than as taxable income upon receipt. This push aims to support the crypto industry’s growth and maintain U.S. leadership in the sector. The effort seeks to reverse a 2023 IRS rule and potentially ease the path for future crypto tax legislation. The Treasury has yet to act on these proposed changes.
*This summary is auto generated by a bot and not meant to replace reading the original article. As always, DYOR.
>House Republicans are pushing the IRS to scrap a 2023 rule that taxes all crypto staking rewards as income.
>They argue staking rewards, which are generated by proof-of-stake networks, should only be taxed when sold off.
This does need a rework. Let’s say I earn .1 ETH staking this year, with a cost basis at $3000 ETH. What happens now is I pay ordinary income tax on $300. That is usually a tax rate of 10-37%. Let’s assume my tax rate is 22% earning $100,000. That means I need to pay $66 in taxes.
Now, let’s assume ETH rallies to $4000 before year end, and on December 31st, I sell that .1 ETH. My cost basis on that is $300, I sold for $400, I now owe an additional 22% on this $100. Now, this isn’t really a problem, because my tax rate is still the same, 22%. The problem is when ETH goes down.
Let’s my .1 ETH goes to $200 by year end. Now, I still how this $66 because I earned staking rewards, but now, because my ETH is only worth $200, I’m essentially paying a 34% tax rate, which is a higher tax bracket than what I am actually in. Remember, the price of ETH doesn’t matter here. What matters, is the price when the reward was earned.
Apply a tax when the reward is sold. Simple. Also, we need to find a better way to handle cost basis. My vote, would be to let us assign cost basis as either the price of the reward when it was earned, or, the price of the reward when it was sold.
Asset goes up in value? Use the price when the reward was earned for your cost basis.
Asset goes down in value? Use the price when the asset was sold for the cost basis.