Cryptocurrency that you have received through mining and/or staking rewards received by holding proof of stake coins is treated as ordinary income per IRS guidelines; this means that you will owe tax on the entire value of your crypto on the day that you received it at your regular income tax rate.
When reporting your earnings from mining, it is important to take into consideration whether you were mining crypto currencies as a hobby or as a business. If you mined cryptocurrency as a hobby, you will report the value of the currency or currencies that you earned as "Other Income" on Line 8 of Schedule 1; earrings received via staking rewards will also be reported as other income. You can report this income within the program by going to:
- Less Common Income
- Other Income Not Reported Elsewhere
However, if you run a mining operation as a business you will report your earnings on a Schedule C and will be subject to self-employment tax. As the mining operation is being treated as a business you may also deduct business expenses such as computer equipment or any other equipment that was necessary to keep the mining operation running. To report business income within the program, please go to:
- Profit or Loss from Business
It is important to note that selling or trading the cryptocurrency that you mined will be realized as a capital gain or loss on that asset. As this is the case you will be required to report the disposition of your crypto asset(s) on Form 8949.
For more information, please visit the IRS official FAQ, here.