When we say proper laws in the crypto industry are important, this is the reason why. The tax regime for crypto staking in the US is totally unjustified. Before this, no kind of creation of a property has been considered to be a taxable event. For example, if a company manufactures a particular product, they don’t pay for the creation of the same. In fact, they pay the tax when the same is sold at the market. But in the case of staking, where tokens are generated, the case is totally different.
Tax regime on crypto staking
Staking rewards are being taxed by the government, which is actually not fair. Almost 75% of the ADA users stake their coins which makes the rewards very high. So, considering that new tokens are being produced at an astounding pace, there is a huge dilution of coins. This effectively makes the value of the coins in the market go down. But the IRS wants to tax them all based on the spot prices when these rewards were created. This is not only impractical but is very difficult to accomplish. And then there comes the problem of over-taxation due to the dilution of tokens.
Another problem with this is the fact that crypto is being treated completely different from other goods. There is no reason for this, and the IRS is just doing whatever they feel like. But it should not work that way, and it is up to us to raise our voice against this. Only if proper laws are introduced in this space retail investors can benefit from their investments.
On taxing rewards upon creation, one of the logic that many are giving is that it is possible to get a fair value of the product. In the case of most things that are created by someone, it is not possible to get the exact taxable income at that point. But in the case of a token, based on the generation time and the market prices, we can come to a price. On the other hand, some compare it to dividends that are paid by companies to shareholders. But in this case, the new tokens are not dependent on the profits of the individual. So, this whole tax regime for crypto staking in the US is flawed.
What are your thoughts on the unjustified tax regime for crypto staking in the US? And do you think that the government will listen and bring some changes? Let us know in the comments below. Also, if you found our content informative, do like and share it with your friends.