Lawmakers Urge IRS to Reform "Double Taxation" on Crypto Staking

A bipartisan coalition of 18 U.S. House representatives is calling on the IRS to overhaul how cryptocurrency staking rewards are taxed, arguing that the current framework stifles innovation and unfairly burdens investors. Led by Representative Mike Carey, the group sent a formal letter to IRS Acting Commissioner Scott Bessent requesting updated guidance before 2026.

The Push for "Tax-at-Sale"

The primary goal of the lawmakers is to shift the tax trigger for staking rewards. Under the current rules, rewards are taxed twice:

1. Upon Receipt: Taxed as income based on the fair market value at the time the reward is earned.
2. Upon Sale: Taxed again as capital gains or losses when the asset is eventually sold.

The lawmakers argue that rewards should only be taxed at the time of sale. This approach, they claim, more accurately reflects a taxpayer's actual economic gain and aligns crypto more closely with how other capital assets are treated.

Strengthening Network Security and U.S. Leadership

The group warned that the administrative complexity and the threat of "over-taxation" are discouraging Americans from participating in proof-of-stake networks. Because staking is vital for securing these blockchains, lawmakers believe the current tax burden could:

• Weaken the security of digital networks.
• Hinder U.S. leadership in the global digital asset space.
• Create unnecessary friction for millions of American token holders.

Alternative Proposals for Relief

Beyond the letter to the IRS, other legislative efforts are underway to provide temporary relief:

• Deferral Options: Representatives Max Miller and Steven Horsford introduced a draft proposal that would allow taxpayers to defer income recognition on staking and mining rewards for up to five years.
• Small Transaction Exemptions: The proposal also suggests tax exemptions for small stablecoin transactions to encourage everyday use.
• Regulatory Alignment: The draft seeks to apply standard securities rules to crypto, such as wash sale restrictions and rules regarding securities lending, while excluding NFTs and illiquid tokens.

The lawmakers concluded by asking the IRS to identify any administrative hurdles that might prevent these updates from being implemented by the end of the year.

December 2025, Cryptoniteuae