US IRS maintains staking rewards are taxable income
The outcome of this case could set a critical precedent for how staking rewards are taxed, with significant implications for the US cryptocurrency industry.

The United States Internal Revenue Service (IRS) has reaffirmed that cryptocurrency staking rewards are taxable as income upon receipt, opposing a lawsuit that argues they should only be taxed when sold. According to its 2023 guidance, the IRS considers block rewards as income based on their market value at the time they become usable.
The ongoing dispute involves Joshua and Jessica Jarrett, who earned 8,876 Tezos (XTZ) tokens in 2019 through staking. The couple believe such rewards should be treated as property, similar to crops or manuscripts, and taxed only when sold. They filed their first lawsuit in 2021, which was dismissed after they declined a $4,000 refund offered by the IRS.
In October 2024, the Jarretts launched a second lawsuit seeking a $12,179 refund for taxes paid on staking rewards in 2020. They argue the IRS’ policy unfairly treats new property as taxable income and are calling for a permanent change to the agency’s tax stance.
The outcome of this legal battle could establish a crucial precedent for how staking rewards are taxed in the US, potentially impacting the entire cryptocurrency industry.