US Lawmakers Push IRS to Fix Crypto Staking Tax Rules Before 2026

Rep. Mike Carey leads effort to eliminate double taxation on staking rewards

Legislative Pressure

US lawmakers led by Representative Mike Carey are urging the Internal Revenue Service to fix cryptocurrency staking rules that result in double taxation. The lawmakers want changes implemented before the rules take effect in 2026.

The effort addresses a significant pain point for crypto holders who participate in proof-of-stake network validation.

The Double Taxation Problem

Under current IRS guidance, staking rewards are taxed as ordinary income when received, based on fair market value at the time of receipt. When those tokens are later sold, holders face capital gains taxes on any appreciation.

Critics argue this framework taxes the same economic activity twice. Stakers pay income tax on rewards they receive, then pay again when disposing of those assets. The combined tax burden discourages participation in staking, which provides essential security for blockchain networks.

The issue parallels longstanding debates about taxing other forms of created property, such as crops grown by farmers or goods produced by manufacturers, which are not taxed until sold.

Carey's Position

Representative Carey, an Ohio Republican, has emerged as a prominent crypto advocate in Congress. His involvement signals bipartisan interest in creating sensible cryptocurrency tax policy.

The lawmakers contend that staking rewards should only face taxation upon sale, treating them similarly to other forms of property creation. This approach would align crypto staking with established tax principles while reducing compliance burdens.

Timeline Urgency

The push for changes before 2026 reflects the approaching implementation deadline for current rules. Taxpayers need clarity well in advance to plan their staking activities and tax obligations appropriately.

Failure to address the issue could drive staking activity offshore or discourage US participation in proof-of-stake networks entirely.