The Internal Revenue Service (IRS) has asserted that crypto staking rewards are taxable upon receipt. This announcement comes in the midst of an ongoing lawsuit initiated by crypto investor Joshua Jarrett.

IRS’s Taxation Approach

The IRS argues that rewards obtained through staking activities must be reported as gross income in the year they are earned. Citing Revenue Procedure 2023-14, the agency states that the value derived from staking is considered taxable income. Taxpayers are required to declare staking rewards as taxable income at the moment they receive them.

The IRS maintains that staking rewards are fully taxable because investors provide “dominion and control.” This stance presents a clear position on the taxation of staking activities.

Legal Battle and Jarrett’s Defense

Joshua Jarrett contends that staking rewards should not be classified as taxable income. He argues that these rewards represent newly created property and therefore should not be considered income.

“Staking rewards should not be considered taxable income.” – Joshua Jarrett

However, the IRS rejects this view, asserting that the rewards are indeed fully taxable for recipients. The outcome of this case could have significant implications for the taxation of staking rewards.