In brief
- House Republicans are pushing the IRS to scrap a 2023 rule that taxes all crypto staking rewards as income.
- They argue staking rewards, which are generated by proof-of-stake networks, should only be taxed when sold off.
- The IRS rule, which the Trump administration has supported overhauling, locks in for the 2026 tax year in just 12 days.
A cohort of Republican House members is pushing the Trump administration to change tax rules on crypto staking rewards before they are locked in for the 2026 tax year.
In a letter sent late Thursday to Treasury Secretary Scott Bessent, a group of 19 House Republicans urged the administration to immediately repeal a 2023 IRS rule declaring staking rewards to be taxable income as soon as they are received by an individual.
Crypto industry advocates have, for years, argued that staking rewards should instead be treated by the IRS as new capital property, and thus only taxed when the funds are eventually sold off.
“It’s critical that crypto gets fair tax treatment so that this burgeoning industry is allowed to thrive in our country and that America remains the crypto capital of the world,” Rep. Mike Carey (R-OH), who led the push to send the letter, told Decrypt.
Carey helped lead a successful push earlier this year to repeal another Biden-era IRS rule requiring DeFi platforms to collect and report key taxpayer information.
Staking rewards are generated by proof-of-stake blockchain networks to incentivize user participation in the protection of a network’s security. Users stake network tokens (such as ETH) with a proof-of-stake network (e.g., Ethereum) to support a decentralized system that verifies all transactions on the network. In return, users steadily accumulate more tokens the longer they maintain their stake.
“Network security—and American leadership—requires those taxpayers to stake those tokens,” the letter to Bessent read, “but today the administrative burden and prospect of overtaxation discourages that participation.”
Staking rewards have become a particularly attractive element of the crypto economy as more blockchains adopt the practice—and larger institutions continue to look for easy ways to make passive income on their massive crypto holdings.
Last month, the Treasury Department gave the green light for Wall Street-traded crypto products to generate staking rewards for investors, in a move expected to greatly increase the attractiveness of such products.
Though the Trump administration has signaled a willingness to revamp staking tax rules for individual investors—and could do so without Congressional approval—it has yet to make that move. Now, the crypto industry is hoping a buzzer-beater push could get the job done before the rules are cemented for the 2025 tax year.
“There was a hope that Bo Hines and others would have worked on this sooner,” one crypto lobbyist, with direct knowledge of the push behind this week’s letter, told Decrypt.
Hines, the first executive director of President Donald Trump’s crypto working group, departed the White House in August for a senior role at stablecoin giant Tether.
The push to get the IRS rule reversed by New Year’s isn’t solely about 2026 taxes. An effort is currently gathering momentum in the House to draft a crypto tax bill early next year, sources familiar with the matter told Decrypt. Industry advocates believe undoing the current staking guidance could make that process significantly smoother.
“Undoing this guidance provides legislators with the maximum latitude to legislate properly on the staking issue,” the crypto lobbyist said.
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