Staking Income and Block Rewards
Disclaimer Staking Income and Block Rewards Introduction As new proof of stake networks come on-line, new focus is being brought to the question of how block rewards and staking income should be taxed. Ideally, of course, tax exempt and foreign recipients of staking income and block rewards would have no obligation to pay US tax, but alas, that may not be the case. While it may be that the concerns described below are over-blown (or more likely, that it will be many years before the IRS is sophisticated enough about crypto currency to pursue these arguments), I’m always interested in evaluating what the risks are and how they might be hedged. I have yet to see any definitive guidance on staking income or block rewards other than the 2014 IRS Notice that focused on mining rewards. Nevertheless, I think it’s a safe bet that the IRS will seek to treat any increase in the number of tokens you own as income as soon as those tokens are credited to your private key. (While I know