Staking rewards
If you stake cryptocurrency on a proof-of-stake network and receive more units as validation rewards, the fair market value of those rewards counts as income in the year you gain dominion and control over them. That is the point at which you can sell, exchange or otherwise dispose of them, and their value is measured at that date and time.
The same rule applies when you stake through a crypto exchange.
Airdrops and hard forks
If a hard fork is followed by an airdrop and you receive new cryptocurrency, you have ordinary income equal to its fair market value when received, as long as you have dominion and control over it. If a hard fork happens but you receive no new coins, there is no income.
Mining
Mined coins are income at their fair market value when received. If your mining is a trade or business, the earnings are self-employment income and self-employment tax can apply.
Getting paid in crypto
Crypto received for services is ordinary income equal to its fair market value in US dollars when received. Independent contractors report it as self-employment income. Your basis in those coins is that same value.
Where to report it
- Staking, mining, airdrops and forks that are not a business: Schedule 1 (Form 1040).
- Crypto received as a contractor, or from a crypto business: Schedule C (Form 1040), with self-employment tax where it applies.
- Later sales of those coins: Form 8949 and Schedule D, using the income value as your basis.
Records to keep
For every reward, note the date and time you could first sell it, the amount, and its US dollar value at that moment. That value is both your income and your basis, so getting it right once avoids paying twice.