The ETH Shanghi update is happening today! Just a few reminders…
Staking rewards are taxable income and need to be reported at fair market value upon receipt. Reporting rewards while still locked has benefits such as potentially lower tax rates for long-term gains.
Those using Coinbase should be aware of a possible tax mistake. When you stake ETH on Coinbase, your rewards are reported on Form 1099-MISC, which is issued annually by Coinbase. This indicates that your rewards were reported to the IRS as taxable income at the time they were earned, even if they were locked up. When you provide ETH to Coinbase for staking, they “convert” it to ETH2 and classify it as a taxable event. When Coinbase distributes staking rewards to users after the Shanghai upgrade, they might “convert”and label this as a taxable event.
If you have any questions, make sure to reach out to a tax professional!
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