Tax Treatment of Cryptocurrency
Questions surrounding the tax treatment of cryptocurrency are complex. According to the recent IRS Revenue Ruling 2023-14, the process of verifying ownership of cryptocurrency is called “ staking.” And when a taxpayer has successfully staked his or her units of cryptocurrency, he or she may also receive “ staking rewards” consisting of additional units.
When does the taxpayer have to include those staking rewards in gross income? A cash-basis taxpayer is said to “ gain dominion” over staking rewards received when he or she can sell, exchange or dispose of them. In the year that the taxpayer gains dominion over the rewards, the fair market value of the rewards must be included in gross income.
Got some more questions? Don’t forget to contact the office or send us an email.