Key Takeaways
- Bipartisan Push: A group of 18 U.S. House lawmakers is urging the IRS to reform crypto staking tax rules before 2026.
- Ending Double Taxation: The core demand is to tax staking rewards only upon sale, not upon receipt, to reflect actual economic gain.
- Supporting Innovation: Lawmakers argue current rules hinder blockchain participation and undermine U.S. leadership in digital assets.
- Legislative Proposals: Complementary efforts include a discussion draft to allow tax deferral on staking rewards for up to five years.
The Drive for Fair Crypto Taxation
A significant bipartisan coalition in the U.S. Congress is accelerating efforts to modernize the tax treatment of cryptocurrency staking. Led by Representative Mike Carey, lawmakers are pressing the Internal Revenue Service (IRS) to update what they describe as "burdensome" guidelines that currently impose a double tax on staking rewards. This initiative aims to align tax policy with the economic reality of blockchain networks and foster greater participation.
The Core Argument: Taxing Realized Gains
The central plea in the lawmakers' letter to the IRS is for a fundamental shift in timing. They advocate that taxes on staking rewards should be levied at the point of sale, not when the rewards are initially received. This approach ensures that stakers are taxed based on their actual, realized economic gain. As Rep. Carey stated, "This letter is simply requesting fair tax treatment for digital assets and ending the double taxation of staking rewards is a big step in the right direction."
The current framework, which taxes rewards as income upon receipt and again as capital gains upon sale, is seen as a major barrier. The lawmakers warn it discourages the very activity—staking—that is crucial for the security and operation of proof-of-stake blockchains. "Millions of Americans own tokens on these networks. Network security — and American leadership — requires those taxpayers to stake those tokens, but today the administrative burden and prospect of over taxation discourages that participation," they wrote.
Complementary Legislative Efforts
Parallel to the push for IRS guidance, House representatives have introduced a legislative discussion draft featuring additional tax relief measures. This proposal includes:
- Exempting small stablecoin transactions from capital gains taxes.
- Offering a tax deferral option for staking and mining rewards for up to five years.
This deferral option presents a pragmatic alternative to an immediate overhaul of the tax code, allowing taxpayers to postpone income recognition on rewards, thereby easing their annual tax liability.
The Stakes for U.S. Crypto Leadership
The lawmakers' campaign is framed as essential for national competitiveness. They conclude their letter by asking the IRS to identify any administrative barriers to updating its guidance swiftly, asserting that change is needed to support the administration's goal of "strengthening US leadership in digital asset innovation." This move highlights the growing recognition in Washington that clear and supportive crypto regulation is key to maintaining technological and economic influence.
As the 2026 deadline looms, the outcome of this push could significantly impact the regulatory clarity and growth trajectory of the cryptocurrency staking ecosystem in the United States.
