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Eighteen members of Congress are asking the IRS to stop taxing crypto staking rewards when they’re received and instead tax them only when sold, arguing the current approach amounts to double taxation.
The bipartisan letter, sent Friday to Acting IRS Commissioner Scott Bessent, warns that existing guidance creates excessive compliance burdens and puts US crypto investors at a disadvantage compared to holders of traditional assets like stocks and real estate.
The lawmakers argue that the current approach taxing rewards when they are received rather than when they are sold amounts to double taxation, and places US crypto investors at a disadvantage compared with other asset holders.
The initiative is being led by Representative Mike Carey, a Republican from Ohio, and reflects growing bipartisan concern that tax policy has not kept pace with the rapid evolution of digital asset markets.
At the heart of the dispute is how staking rewards are classified for tax purposes. Under prevailing IRS interpretations, crypto tokens earned through staking are generally treated as taxable income at the moment they are received, based on their fair market value at that time.
When those tokens are later sold or exchanged, investors may also owe capital gains tax, depending on price movements.
Lawmakers argue that this framework does not accurately reflect how staking works or how investors realize economic gains. In volatile crypto markets, the value of a reward at the moment of receipt may differ significantly from its value at sale, creating tax liabilities that do not align with actual profits.
“This letter is simply requesting fair tax treatment for digital assets,” — Rep. Mike Carey, US House of Representatives.
Ending what lawmakers describe as double taxation, Carey added, would be a big step in the right direction for everyday investors.
In the letter, the group contends that taxing staking rewards only when they are sold would bring digital assets more in line with traditional capital gains treatment applied to stocks, real estate, and other investment assets.
“Stakers are taxed based on a correct statement of their actual economic gain,” the lawmakers wrote, framing the proposal as a way to reduce friction without undermining tax compliance.
Lawmakers warn that the current tax structure actively discourages this participation, particularly among retail investors who may lack the resources to navigate complex reporting requirements.
According to the letter, Millions of Americans own tokens on these networks which implies that 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 of individuals.
Industry participants have echoed these concerns in past debates, arguing that overly aggressive taxation risks pushing staking activity offshore or into less transparent arrangements. For investors, the uncertainty can also complicate portfolio planning, especially for those who automatically restake rewards or use multiple platforms.
A crypto tax attorney familiar with staking compliance said the issue is not tax avoidance but clarity. Sarah Collins, Partner, Collins Digital Tax Advisors, says that most investors want to comply but taxing unrealized rewards creates cash-flow problems and reporting headaches that simply don’t exist in other asset classes,
The lawmakers’ letter asks the IRS whether any administrative barriers prevent it from updating staking guidance before the end of the year. The timing is deliberate: without changes, investors fear that existing interpretations could be further entrenched as digital asset usage expands.
The request also aligns with broader political efforts to position the United States as a global leader in blockchain innovation. Lawmakers argue that clear, investor-friendly tax rules are essential if the US hopes to compete with jurisdictions that have adopted more tailored crypto frameworks.
While the IRS has not publicly responded to the letter, previous agency statements have emphasized the need to apply existing tax principles to new technologies. Critics, however, say staking represents a novel case that warrants specific guidance rather than analogies to wages or interest income.
The push on staking taxes follows a separate initiative led by Representatives Max Miller and Steven Horsford, who recently introduced a discussion draft aimed at easing crypto tax compliance more broadly.
That proposal includes an exemption for small stablecoin transactions and an option for taxpayers to defer income recognition on staking or mining rewards for up to five years. Supporters say such measures could provide immediate relief while regulators and lawmakers work toward long-term clarity.
The draft also seeks to align digital assets more closely with existing securities tax rules. It would apply wash sale restrictions to cryptocurrency, limit certain gain-locking strategies, and extend securities lending treatment to qualifying crypto loans involving fungible and liquid assets. Non-fungible tokens (NFTs) and illiquid digital assets would be excluded.
