In the new “Revenue Ruling 2023-14,” IRS officials clarify how cryptocurrencies received as a reward from steakage should be taxed. Officials emphasize that gross income is defined as income received in any form. Including in the form of property, services or money and, as it now appears, in the form of steakage fees.
Crypto-assets received both by direct steaking and by steaking through cryptocurrency exchanges are subject to taxation. That said, the taxpayer only pays tax after withdrawing funds from the wallet – they must include the dollar equivalent of the withdrawn steakage rewards on their income statement as of the date of withdrawal.
“The fair market value of the awards is determined as of the date and time the taxpayer obtains power and control over the transaction validation award,” the document notes.
According to Messari founder Ryan Selkis, the IRS appears to be taking the steakage award as a stock dividend. However, in this case, the number of coins is increasing, so steaking is not like paying a dividend.
“The IRS says that steaking rewards on Proof-of-Stake networks should be included in gross income. That is, they take the steakage concept as a dividend and tax it similarly. Basically, we have to pay tax for cutting a pizza into 10 slices instead of 8,” Selkis wrote.
Earlier, the US Internal Revenue Service said many cryptocurrency traders and fund managers were abusing Puerto Rican tax breaks.