I bought SOL with a cost basis of 200 two years ago. It’s sitting in Solflare. If I stake it, it becomes a taxable event. I’m down 70%. So would those losses carry over $3,000 per year until gone? I haven’t made any trades this year so I don’t have any profits to deduct the loss from.
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Depending what state you live in it can be different but the general idea is this:
Staking your Sol is not a taxable event, and does not generate taxes on the base amounts.
The rewards for staking are treated as income (not capital gains) and taxed at income tax rate. So if you receive a reward, whatever the reward is in USD will then need to be taxed when you do your taxes. If later you sell that SOL, the amount it was worth when you go the reward is considered your cost basis, and gains/losses are calculated off that. If you sell for a profit you pay short or long term capital gains.
Assuming you’re in the US, the answer is yes. Your presumption is correct.
My understanding is you (potentially) pay tax twice.
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The $SOL earned through staking is taxed as regular income. This is the first taxable event.
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Once you sell the $SOL, you then would pay short or long term capital gains tax on any profits. This is the second taxable event.
Conversely, if you sold at a loss you could write it off on your tax return ( up to $3k a year ).
Not an expert though so I’d also like advice if I’m mistaken.
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Is anyone actually checking up on this stuff? Asking for a friend. In the UK, they still haven’t prosecuted many people they know took out fraudulent COVID loans etc.
Yes the IRS checks everything.
Staking isn’t a taxable event, the rewards are though. Pretty sure they are income tax. Staking sol isn’t disposal.
Here is my amateur take on your situation. Staking itself is not a taxable event but the cost to do so is added to your adjusted cost base and the staking rewards you receive are taxed separately similar to interest from a high yield bank account. Since you have not sold your SOL yet, you do not have a capital loss for tax purposes but once you do sell some or all of it, then it becomes a taxable event and can consider the carry back and forward rules. As to stake or not stake, you should have staked all along given you’ve held your position. It’s like writing a covered call that never gets called - money that offsets your paper loss.
Tax is a scamm but is better than the cactus rape you will get if you get audit. Regulations are coming and with this you best believe all the crypto wallet address will be audited. We wanted this,we can’t hide our addresses the moment you move your money to a kyc exchange they know who you are. People have been getting away with paying no taxes for a while , if regulations come that’s gonna end. Best to pay up than get screwed later.
I’m pretty sure it would help to say where you are from.
With staking you’re not taking anything out or transferring anything. Why would you pay taxes on it? Only when you transfer it out of your wallet to sell it. But even then. Fuck paying taxes
Staking crypto is like money parked in a savings account that accrue interests so yeah technically you have to report it to IRS even if it’s less than $10 you earned that year.
It tells your your gains when staking and you need go report them
So let me get this straight.
You’re down 70% and worried about taxes?
Just a little piece of advice.
FIRST - worry about making money not losing it SECOND -worry about taxes after step 1
Does anyone know where we can get a list of the current price at the end of each epoch?
For taxes, we should know how much crypto we got per epoch and at what price. I have never seen a functioning website that really shows this…You lost all your SOL on a ledger somewhere anyway… taxation is theft
What do you mean I lost it? It’s in my wallet.
check with a tax specialist that knows about crypto laws which there arent really any right now. But I would expect it is similar to stock market taxes, so you only get taxed once you “realize” gains which means you sell for fiat. Weird enough this shouldnt require taxes if you covert to stable coin or any other crypto since its still crypto and not fiat. Once you do realize gains, I believe you can write off any losses against gains including staking returns but Im not sure. The equivalent would be dividends from stock for market income. Honestly a possible strategy to minimize taxes in usa is convert to stable coin if you want to “remove yourself from crypto volatility” and only cash out specific amounts every year as needed and try to zero out your loss vs gains so no taxes will be issued