What Happened?

If you own cryptocurrency and earn new coins through staking, a federal court says you owe taxes on those coins the moment you receive them. A June 2026 U.S. Tax Court ruling in *Paschall v. Commissioner* backed the Internal Revenue Service (IRS) position that staking rewards count as taxable income right away, not when you eventually sell.

Some taxpayers had argued that restrictions on moving newly earned tokens meant they didn't truly "own" them yet, or that staking rewards were more like stock dividends that aren't taxed until sold. The court rejected both arguments.

Why Does it Matter to Me?

The ruling affects anyone who earns digital assets through staking, a process where holders of certain cryptocurrencies lock up their coins to help verify transactions and earn rewards in return. Under the court's decision, those rewards are income the year you get them, even if you haven't sold a single coin.

Miners face a similar rule. The IRS has required since 2014 that miners report the fair market value of newly mined tokens as income on the day they receive them. If mining is your business, that income is also subject to self-employment taxes.

Owners of non-fungible tokens (NFTs) face their own wrinkle. The IRS treats an NFT as a collectible if the underlying asset it represents is itself a collectible, and collectibles face a capital gains tax rate of 28 percent, higher than the standard long-term rate most investors pay.

Both Sides, Now

The Congressional Research Service report published Sept. 2 lays out the tension clearly. The IRS has built its digital asset tax rules piece by piece since 2014, treating cryptocurrency as property rather than currency. The 2021 Infrastructure Investment and Jobs Act added a formal definition of "digital asset" to the tax code and created new reporting requirements for transactions.

Some lawmakers want to change the rules. Bills pending in Congress would let miners and stakers put off reporting income until they actually sell or spend their tokens, rather than the moment they receive them. Other proposals would remove a requirement that donors of widely traded digital assets get a formal appraisal before claiming a charitable deduction.

Supporters of those changes argue the current rules create a tax burden on income that hasn't yet turned into cash. Critics of changing the rules say deferring taxes on digital asset income would treat crypto differently from other forms of compensation.

What Happens Next?

The proposed bills that would change mining and staking tax rules remain pending in Congress. No vote has been scheduled. For any change to take effect, both the House and Senate would need to pass the same legislation and the president would need to sign it. Until that happens, the Tax Court's ruling stands as the governing standard: staking and mining rewards are taxable income the day you receive them.

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