Taxed before you can sell

The problem

When a miner successfully validates a block, or a staker earns a validation reward, the IRS treats the tokens as ordinary income the instant they are received — measured at their fair market value on that date. The tax is owed for that year whether or not the tokens are ever sold, and whether or not the taxpayer has any dollars in hand to pay it.

For mining, this is Notice 2014-21 (Q&A-8): a taxpayer who mines virtual currency “is required to include the fair market value of the virtual currency as of the date of receipt in gross income,” and if the mining rises to a trade or business, the net earnings are also subject to self-employment tax. For staking, it is Revenue Ruling 2023-14: a cash-method taxpayer who stakes cryptocurrency and receives validation rewards “must include the fair market value of the rewards in gross income in the taxable year in which the taxpayer gains dominion and control over the rewards.”

A reward can be worth $1,000 the day it is received, generate a $1,000 tax bill, and be worth $200 by the time the taxes come due.

That is the trap. Rewards are taxed at receipt, at a price that is often the year’s high, in a volatile asset the taxpayer may not have sold — and often cannot easily sell in the small amounts a reward arrives in. The result is a tax bill on paper income that may have evaporated, payable in dollars the taxpayer never received.

Why it is unfair

A core principle of income tax is that people should be taxed on income they can actually access. Mining and staking rewards break that principle twice over. The income is recognized before there is any cash to pay it, and it is measured at a price that can vanish before the return is even filed. A grain farmer is not taxed on a standing crop before harvest; a stock investor is not taxed on shares until they are sold. Taxing a block reward at the moment it is minted treats new-token creation more harshly than either.

It also lands hardest on ordinary participants. A hobbyist running a single validator, or a saver who stakes to earn a modest yield, faces the same immediate recognition as a large operation — but without the accounting infrastructure to track a fair market value for every reward at the instant it posts, sometimes many times a day.

What we are asking Congress to do

We are advocating for a straightforward fix: let miners and stakers elect to defer income on newly minted block rewards until the tokens are sold or exchanged, and tax the proceeds at that point. The taxpayer would recognize income when they actually have the dollars to pay it, valued at a price that is real rather than a fleeting mark. That is exactly the approach in H.R. 9175, the Tax Clarity for Mining and Staking Act — introduced in June 2026 by Rep. Mike Carey and referred to the House Ways and Means Committee — which would let taxpayers elect to treat newly created digital assets like self-created property, deferring recognition until disposition and then taxing the gain as ordinary income.

Where this stands

This is settled IRS guidance, not disputed law: Notice 2014-21 and Rev. Rul. 2023-14 are how the IRS applies current law today. Changing the timing rule takes an act of Congress. We have raised this directly with the tax-writing committees alongside our other priorities, and we support H.R. 9175 and other legislation that would move the point of taxation to the point of sale.

A note on what this page is: Digital Asset Tax Advocacy is a 501(c)(4) advocacy organization, and this page is advocacy — we describe current law accurately, and we are asking Congress to change it. Nothing here is tax or legal advice; how the rules apply to any particular miner or staker depends on their facts under current law, which this proposal has not yet changed.

Last reviewed August 3, 2026 · Reviewed by Andrew Gordon, JD, CPA