Crypto + staking + tax

Staking is taxed as income tax. Each time staking returns are paid out (usually weekly or monthly) that's a taxable event and should be noted properly like you would if earning dividends.

Doesn't matter if it's paying out in crypto or fiat, same event applies.

I use cointracking.info for all that stuff. Not a tax professional but that's what I've been doing.

Shamo wrote: »

Staking is taxed as income tax. Each time staking returns are paid out (usually weekly or monthly) that's a taxable event and should be noted properly like you would if earning dividends.

Doesn't matter if it's paying out in crypto or fiat, same event applies.

I use cointracking.info for all that stuff. Not a tax professional but that's what I've been doing.

If it's regarded as dividends, would it not be subject to dividend withholding tax rather than income tax?

ZeroThreat wrote: »

If it's regarded as dividends, would it not be subject to dividend withholding tax rather than income tax?

Dwt is tax withheld, on the income. However, the income still subject to income tax at your prevailing rates.

Dwt is not the final liability to tax, same as DIRT is not the final liability when considering interest income.

Bob24 wrote: »

IMO this is completely unclear and something revenue would need to clarify (but it might be too small at this stage for them to be interested in it).

Depending on how you look at staking, one could argue this is interest (DIRT), income (income tax), or even capital gain (CGT) ... it is not a clear cut.

My view is that it is closer to interests paid on a savings account than the other two options. But at the end of the day the view which matters is Revenue's.

Disclaimer: not tax advice only my opinion

I'd be happy if it did turn out to be DIRT or CGT (I highly doubt CGT though) as its lower % than the higher income tax bracket it seems. Guess i'm playing it safe but I do have some reasoning behind it.

Staking seems to be used quite loosely as a term now like you said. It in my mind has generally been where you're doing a task and receiving income for that task in the form of payouts, similar to mining. Ethereum will soon replace mining with staking to validate the network.

Cosmos stakers run expensive virtual machines to validate the network, the more tokens they use to validate the network the more chance of more rewards. They can offset expenses with profits to report tax.
Cosmos delegators can "bond" their tokens to the Cosmos stakers which gives them less rewards but similar risk levels without the high expense as they don't have to run the VMs themselves.

Cosmos stakers are actively doing a task to receive income which is income tax (imo).
Cosmos delegators are still putting their tokens to work by assisting with validating the network but they are not actively doing a job so grey area possibly.


Then you have the likes of crypto.com where they say you "stake" a certain amount of MCO to receive benefits on the card, which is fine but no tax yet on that. They then give you 6% APR on the "staked" MCO tokens. Probably this could be seen as the grey area where it can be both DIRT or income tax, maybe even more towards DIRT.

Celsius offers % APR for depositing your tokens to earn interest and as far as you're concerned the tokens are just sitting there. Maybe more toward DIRT.

I just realised the other day that Steem had a hard fork and I received an equivalent amount of HIVE tokens for the steem I had in my wallet. This would probably fall under income tax I guess.

onlineweb wrote: »

Currently staking MATIC, where you earn up to 50% rewards.

However if I decide to sell my holdings how do I distinguish between my investment and the MATIC I received for staking in relation to my end of year tax returns?

I don’t think you will find any official guidance on this, but *IMO* you are might be supposed to pay 2 taxes:
- DIRT on the earnings (i.e. interests) you are receiving (based one the euro value of those interests on the day they were paid to you.
- CGT on any disposal of your MATIC into euros, based on the FIFO logic as per defined in the CGT legislation, i.e. what defines what is being sold for the purpose of CGT is not whether you are looking at your principle or your interests, but at which date those coins became your property (regardless of them becoming your property as a result of a conversion from euros or as an interest payment).

But to be honest, this area is very much unclear I am don’t even thing Revenue would have an official stance on staking.

rapul wrote: »

Be the hokey! Where are u getting nearly 50%?!

MetaMask

Congressional lawmakers urge the IRS to craft proactive tax policy for crypto staking rewards

https://www.theblockcrypto.com/amp/linked/73937/congress-letter-staking-taxes?__twitter_impression=true

SkySter wrote: »

MetaMask is just the wallet. What Token/Smart Contract?

Google Matic staking.