Congress still has not settled one of the central tax questions in digital assets: when staking and mining rewards become taxable income. A September 16 analysis from the National Taxpayers Union Foundation says lawmakers are working on broader digital-asset rules, but taxpayers remain stuck with uncertainty as courts and the IRS shape the current framework.
For affluent households with meaningful crypto holdings, the question matters because staking and mining can generate assets before any cash is realized. If those rewards are taxed on receipt rather than on sale, investors may face taxable income before they have converted the tokens into dollars.
What Changed
The immediate development is not a new statute or IRS notice. Instead, the NTU Foundation argues Congress should keep working on tax legislation for staking and mining after removing a compromise provision from the House Ways and Means Committee's markup of the Digital Asset Tax Certainty Act, H.R. 10357.
That removed provision would have delayed taxation of staking and mining rewards for five years after receipt. According to the paper, lawmakers chose not to move ahead with that approach for now, leaving current uncertainty in place.
The result is that taxpayers must continue to rely on IRS guidance that generally treats digital assets as taxable when a taxpayer obtains dominion and control over them. The paper's core point is that this framework may not fit blockchain rewards cleanly because staking and mining do not map neatly onto traditional tax categories such as compensation, dividends, or self-created property.
Why the Tax Question Is Still Open
The policy dispute turns on a basic classification issue. Staking in proof-of-stake systems generally requires locking tokens into a blockchain in exchange for rewards, while mining in proof-of-work systems yields newly formed cryptocurrency through computational work. In both cases, the taxpayer may receive newly created digital assets without a conventional payer deciding to issue compensation.
That distinction matters. The NTU Foundation says policymakers are right to ask whether these rewards should be taxed more like self-created property, which is generally taxable upon sale, or more like compensation, which is generally taxable when received.
The paper argues current law lacks a perfect analogy for a taxpayer receiving property of value by interacting with a self-executing digital protocol rather than by being paid by another person or business. That is one reason Congress, rather than federal agencies alone, may need to set a clearer rule.
What the Recent Cases Say
Two cases frame the current debate, and both are fact-specific.
First, the U.S. Tax Court issued a memorandum decision in Paschall v. Commissioner on June 4, 2026, concluding that the taxpayer's staking rewards were taxable. The NTU Foundation notes that memorandum decisions are often used in fact-driven disputes, and it argues the ruling should not necessarily be read as a universal answer for all staking arrangements.
The paper highlights the Tax Court's own tension in describing the activity. On one hand, token holders did not receive rewards automatically based solely on ownership; they had to stake tokens and accept potential forfeiture risk. On the other hand, the court also said the taxpayers lacked the power to decide whether and when the property was created, a point that cuts against treating the rewards as self-created property.
Second, the paper revisits Jarrett v. United States. In 2022, the IRS refunded taxes the Jarretts had paid on staking rewards after they argued those rewards were not taxable income. But the refund did not establish a general rule for future years, and a refiled case is now pending in the U.S. District Court for the Middle District of Tennessee.
Taken together, those disputes suggest the legal picture remains unsettled. The NTU Foundation's view is that neither case fully resolves the statutory question for Congress or taxpayers.
The After-Tax Math
The practical issue for higher-income taxpayers is cash-flow mismatch. Digital assets can be volatile, and the paper notes that staking and mining rewards are not currently usable as cash equivalents even if they can be exchanged for cash through a third-party exchange.
Example: assume a household receives $100,000 of staking rewards in a year and owes tax when those tokens come under its control. If the household keeps the tokens and their value falls before tax is due, the family could still owe tax based on the earlier value while holding assets worth much less by filing season. If taxation were delayed until disposition instead, the taxable event would occur when the household actually realized value through a sale or exchange.
| Example Scenario | At Receipt | Later at Tax Time |
|---|---|---|
| Staking rewards recognized immediately | $100,000 of taxable value | Tax may still be due even if token prices fall |
| Taxation delayed until disposition | No immediate tax event | Tax generally tied to realized sale or exchange value |
This is an illustration, not a tax calculation. Actual treatment depends on facts, basis reporting, later price changes, and whatever final rules Congress or the courts establish.
What to Watch Next
There are two immediate items to watch. First is whether Congress returns to staking and mining specifically even if other digital-asset tax provisions move first. The NTU Foundation says the issue is "far from resolved" and calls for a bipartisan framework that distinguishes among different protocols and fact patterns.
Second is whether the pending Jarrett litigation produces a more definitive court ruling. That case could affect how aggressively taxpayers challenge the current IRS approach, though it would not replace congressional action.
For investors, founders, and business owners with large digital-asset positions, the main after-tax takeaway is narrower than many headlines suggest: there is still no fully settled legislative rule on staking and mining rewards. Households with material exposure may want to discuss recordkeeping, liquidity for possible tax bills, and protocol-specific facts with a CPA or tax counsel while Congress and the courts continue to sort out the answer.
Sources
- First reported Congress Must Continue Work on Staking and Mining Cryptocurrency Taxes — National Taxpayers Union Foundation
- Congress — Wikipedia
After TAX is an independent publication. Articles are general information, not tax, legal or investment advice. Consult a licensed professional about your situation.
