US Lawmakers Demand IRS Overhaul Crypto Staking Tax Rules Before 2026 Deadline
Washington's crypto clash heats up as legislators push the taxman to clarify the rules—or risk stifling a multi-billion dollar innovation engine.
The Regulatory Countdown Begins
A bipartisan group of lawmakers just fired a shot across the IRS's bow. Their message? The current framework for taxing staking rewards is a mess—vague, inconsistent, and potentially punitive for a core function of modern blockchain networks. They're demanding clear guidance before 2026, arguing that uncertainty is freezing development and pushing talent overseas.
Why Staking Tax Clarity Matters Now
Staking isn't just niche tech—it's the backbone of proof-of-stake networks that secure billions in value. Participants lock up assets to validate transactions and earn rewards. But is that reward income at receipt? Or is it property created later, like mined ore? The IRS hasn't definitively said, creating a compliance nightmare. Lawmakers warn that getting this wrong could treat a productive, network-securing activity like a speculative casino bet—another classic case of old rules failing new money.
The Stakes for the Ecosystem
Without clear rules, everyday users and institutional players alike are flying blind. Some platforms issue 1099s for rewards users may never sell; others don't. This inconsistency breeds fear, not innovation. The push for clarity aims to unlock institutional capital waiting on the sidelines, ensuring the U.S. doesn't cede its competitive edge in digital asset infrastructure. After all, why build here if the tax treatment is clearer in Singapore or Switzerland?
What Comes Next?
The ball is now in the IRS's court. The agency can choose to provide formal guidance, propose new regulations, or kick the can past the 2026 deadline—a move that would likely spur more aggressive legislative action from Capitol Hill. The crypto industry is watching closely, hoping for rules that recognize staking as a distinct, productive economic activity, not just another line item for the tax man to dissect. Because in finance, the only thing more certain than death and taxes is a regulator's knack for misunderstanding innovation until it's too late.
US Lawmakers Push to End “Double Taxation” of Crypto Staking Rewards
The group said staking rewards should be taxed only when sold, rather than when they are received and again upon disposal.
“This letter is simply requesting fair tax treatment for digital assets,” Carey said, adding that ending what lawmakers view as double taxation of staking rewards WOULD be “a big step in the right direction.”
Under current interpretations, staking rewards are typically treated as taxable income at the moment they are received, based on their market value at that time.
Lawmakers argue that this approach fails to reflect actual economic gains, particularly in volatile markets, and creates complex reporting obligations for everyday users.
The letter contends that taxing rewards at the time of sale would better align with how capital gains are calculated across other asset classes.
“Stakers are taxed based on a correct statement of their actual economic gain,” the lawmakers wrote, describing the change as a way to reduce friction without weakening tax compliance.
BREAKING:
HOUSE LAWMAKERS INTRODUCE NEW CRYPTO TAX BILL:
• STABLECOIN PAYMENTS UNDER $200 TAX-FREE
• STAKING & MINING TAX DEFERRAL UP TO 5 YEARS
• CRYPTO TAX RULES ALIGNED WITH SECURITIES LAW
• WASH TRADING LOOPHOLES TARGETED pic.twitter.com/N4z9ncdvWR
The group also warned that the existing framework discourages participation in staking, which plays a central role in securing proof-of-stake blockchains.
“Millions of Americans own tokens on these networks,” the letter said. “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.”
Lawmakers asked the IRS whether any administrative barriers stand in the way of updating the guidance before the end of the year, framing the request as consistent with broader efforts to strengthen US leadership in digital asset innovation.
US Lawmakers Propose Tax Relief for Small Stablecoin and Staking Transactions
Before this, Representatives Max Miller and Steven Horsford introduced a separate discussion draft aimed at easing crypto tax obligations, including an exemption for small stablecoin transactions and new options for staking and mining rewards.
Rather than fully overhauling staking taxes, that proposal would allow taxpayers to defer income recognition on staking or mining rewards for up to five years.
Supporters say the measure could provide relief while lawmakers and regulators work toward longer-term clarity.
The bill also extends several securities tax rules to digital assets.
It would apply wash sale restrictions to cryptocurrencies, limit strategies designed to lock in gains while delaying taxes, and extend securities lending treatment to qualifying crypto loans involving fungible, liquid assets. NFTs and illiquid tokens would be excluded.
