- The IRS has affirmed that cryptocurrency is property for tax purposes.
- Crypto assets will be taxed in specific ways, depending on how they are used.
- Proposed U.S. legislation could end tax deferral benefits for crypto miners and stakers.
Cryptocurrency users face specific consequences following the IRS‘ affirmation of its position on the crypto tax regime, as contained in the latest Congressional Research Service (CRS) report released on September 2. The agency’s position aligns with the June 2026 US Tax Court ruling in Paschall v. Commissioner, which classified crypto as property and not currency.
This classification implies that digital assets will not enjoy the “foreign currency” tax exemptions that apply to traditional cash transactions, but that is only the tip of the iceberg. Classifying cryptocurrency as property rather than currency affects how users mine, spend, sell, swap, and stake digital assets.
How Does the IRS Tax Regime Affect Crypto Users？
The IRS classification determines the applicable tax regime for digital asset income. Therefore, staking rewards and mining payouts come to the fore when analyzing how the affirmed classification affects cryptocurrency users.
Under this structure, the IRS would treat staking rewards and mining payouts as ordinary income, which begins when users receive the crypto in their wallets. Considering the referenced Paschall v. Commissioner court ruling, crypto users owe income tax on the Fair Market Value (FMV) from the moment they receive crypto tokens in their wallets.
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Apart from earnings through staking or mining, other crypto use cases attract specific tax requirements. For instance, selling a crypto token makes the user liable for capital gains tax, just like swapping one crypto for another, which is legally classified as a “barter exchange of property.”
The IRSs current property classification of digital assets treats spending cryptocurrency as selling property to fund a purchase. Therefore, users engaging in such transactions are also liable for capital gains tax.
Unlike traditional property, digital assets are prone to price fluctuations. Under such circumstances, the IRS would treat the asset in two separate steps. The price when a user receives a particular crypto establishes “income” and locks in the “cost basis.” Any subsequent price movement becomes the “capital gain or loss” only when the user disposes of the asset.
What Could the Future Hold？
While the IRS maintains the current crypto tax regime, a legislative package to review crypto taxation is moving through the US House Ways and Means Committee. If passed, the new law will completely overturn current IRS guidance allowing crypto miners and stakers to defer income recognition.
Under this law, newly minted or received validation tokens would be treated more like self-created property rather than an immediate cash payout. Users will not owe income tax on rewards when received. Instead, they will pay taxes only when they sell or dispose of the assets, eliminating the “phantom income trap” that conditions users to owe taxes on rewards that drop in value before they can sell them.
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