How to enter Crypto gained from crypto earned feature in taxes
So I purchased crypto four times [ the same type ] within two months back in 2021. I sold it all in 2025. I reported the dates bought and sold for all four purchases and calculated the units that were sold with the value of each unit on the day it was sold so it gave me the profit of each individual purpose. My issue that I'm running into is that I opted for crypto earn which allows you to gain tokens if you stake a percentage of your owned coin and you get interest. I'm confused on how I report this interest to the IRS because it was sold along with my purchases. I'm using the freetaxusa software and I'm not sure where to enter it. I have received a 1099 DA but it only really shows the proceeds and not the complete breakdown. Any help is greatly appreciated =]
Answers
-
Hello TommyC, The IRS Rev. Rul. 2023-14 explained when to report the income from the gained tokens when you stake your cryptocurrency coins here:
The IRS states that you must report the gained tokens from your staking as income "in the taxable year in which the taxpayer gains dominion and control over the validation rewards." The IRS defines "dominion and control" as "the ability to sell, exchange, or otherwise dispose" of the gained tokens.
You should report the digital assets income in the year when you sell or exchange the additional tokens that you earned. If this is 2025, then you would report it as Other income under "Digital assets received as ordinary income not reported elsewhere."
Then, if you also sold it in 2025, you get a basis for these tokens since you have paid taxes on their values. You do not need the 1099-DA to break out the crypto you purchased and the crypto you earned. As long as you reported and paid taxes on the value of the earned tokens, those became part of your basis.
0 -
Ahh I see. So I would report the 4 dollars [ From the crypto i earned ]under digital assets? I think I put the 4 dollars under 1099 int in the same sections as the crypto I bought and sold. Would this pose a problem or should I amend the taxes and make the correct?
0 -
Hello TommyC:
To follow-up on the post from JohnV, the crypto you earned in connection with staking should be reported as other income in the year you earned the crypto. Thus, if the value of the crypto you earned in 2025 from staking was worth $4, then report the $4 as follows: click on the Income tab > click on Other Income (right side column, near the bottom) > scroll down to the section “Digital Asset Income” and select “Yes,” > in the drop-down, enter the value of the crypto earned through staking.
If you had staked your crypto in earlier years, then any crypto earned from staking in those prior years would be reported as mentioned above.
In 2025, when you sold your crypto—the crypto you purchased and the crypto you earned from staking—that gets reported in our Investments and Savings section, and in this section you are either reporting a gain or loss upon the sale. From your post, it appears you have reported your sales correctly, but that you might have to remove the $4 earned from staking and report the $4 as mentioned above.
If necessary you can amend your 2025 tax return, but only after the IRS has formally “accepted” your tax return. After acceptance by the IRS, you can then log back into your account and select the option to amend your 2025 tax return. Right now, it’s unclear what affect any change you may need to make will have on your overall tax return, but follow-up with us if an amendment is necessary.0 -
Yes I did get a notice saying my tax return was accepted. Ill go in and remove the 4 dollars from the 1099 int section and report it as other income under the digital assets. Thanks for your help.
0
