US Lawmakers Urge IRS to Reassess Crypto Staking Tax Regulations Before 2026

US Lawmakers Urge IRS to Review Crypto Staking Tax Rules Before 2026

Summary:
A bipartisan group of U.S. lawmakers is urging the Internal Revenue Service (IRS) to reconsider how cryptocurrency staking rewards are taxed. They argue that the current regulations lead to double taxation, making it burdensome for investors. If revised, lawmakers believe it could encourage participation in blockchain networks and bolster U.S. leadership in the digital asset space.

Key Takeaways:

U.S. lawmakers are pressing the IRS to re-evaluate the taxation of cryptocurrency staking rewards, claiming it results in double taxation.
They advocate for implementing taxes only when staking rewards are sold to more accurately reflect actual economic gains.
Current tax rules may dissuade participation in staking, potentially undermining blockchain security and the United States' leadership in this emerging field.

On Friday, a bipartisan group of 18 U.S. House representatives, led by Republican Mike Carey, sent a letter to IRS Acting Commissioner Scott Bessent. They requested a review and update of the current taxing guidelines, which they deemed “burdensome,” ahead of the 2026 deadline.

US Lawmakers Advocate for Fair Taxation of Crypto Staking Rewards

The lawmakers emphasized that staking rewards should be taxed only at the time of sale, not when they are initially received, which they argue leads to an unjust situation resembling double taxation.

Mike Carey remarked, “This letter is simply requesting fair tax treatment for digital assets,” explaining that abolishing what they perceive as double taxation on staking rewards would be a significant advancement.

Currently, staking rewards are classified as taxable income at the moment they are earned, calculated based on their market value at that time. The lawmakers argue that this method does not accurately reflect economic gains in volatile markets and imposes complicated reporting requirements on regular users.

The letter indicates that taxing rewards at the time of sale would be more consistent with capital gains taxation applied to other asset types. “Stakers are taxed based on a correct statement of their actual economic gain,” the group asserted, describing the proposed changes as a means to minimize friction while maintaining tax compliance.

The lawmakers also highlighted that the current tax framework discourages users from participating in staking, which is essential for securing proof-of-stake blockchains. “Millions of Americans own tokens on these networks,” their letter stated, explaining that the security of these networks—and the U.S. position as a leader—depends on taxpayers staking their tokens. However, the existing administrative burdens and potential for excessive taxation are likely deterring participation.

Lawmakers specifically inquired if any administrative challenges could impede the IRS from updating its guidelines by the year's end, framing this request as part of broader efforts to bolster U.S. leadership in digital asset innovation.

Tax Relief Initiatives for Small Stablecoin and Staking Transactions Proposed

In a related effort, Representatives Max Miller and Steven Horsford previously introduced a separate discussion draft that aims to alleviate crypto tax obligations. This proposal includes an exemption for minor stablecoin transactions, alongside new regulations regarding staking and mining rewards.

Instead of completely overhauling the existing tax structure for staking, this proposal would permit taxpayers to defer income recognition on staking or mining rewards for a period of up to five years. Supporters believe this could provide valuable relief while lawmakers and regulators strive for clearer, long-term guidelines.

Additionally, the bill seeks to extend various securities tax rules to digital assets. It proposes applying wash sale restrictions to cryptocurrency, limiting strategies aimed at locking in gains while postponing taxes, and extending securities lending treatments to applicable crypto loans involving fungible, liquid assets—while excluding NFTs and illiquid tokens.