Solana Staking Taxes and Reporting Guide

Solana is a proof-of-stake blockchain where individuals and entities stake SOL to secure the network. In exchange, stakers earn a steady stream of inflation rewards and MEV fees.

In most jurisdictions, receiving tokens in exchange for staking SOL is taxable. So, before you stake your SOL, it’s important to understand the tax liabilities.

We partnered with Awaken, a crypto tax software specializing in Solana, and Darien Advisors, a crypto tax accounting and advisory firm, to explain how staking taxes work.

In this post, we’ll cover how most countries tax staking rewards, how to find the rules and regulations in your specific jurisdiction, and how to avoid unwanted surprises.

Basics of Solana Staking Taxes

With few exceptions, SOL staking rewards are taxable in almost every country around the world. At the end of the year, your cumulative tax bill will be based on the value of all the SOL you received as staking rewards at the time you received it.

Are Solana staking rewards taxable income?

Most tax authorities view staking rewards as income, including the United States (IRS’s 2023-14 Rev ruling), the United Kingdom, and Australia. These countries treat staking rewards similarly to interest earned in a savings account. 

Your tax liability is based on the fair market value (in your local currency) of your staking rewards when you gain dominion and control. 

For example, if you earned $10 of staking rewards in July, but that SOL is worth $7 when it’s time to file, you owe taxes based on the $10 value. 

Some people have argued that staking rewards should be classified as newly created property, and therefore not taxed until the assets are disposed of. But these arguments have still not been resolved in court, leaving staking rewards as a grey area. 

Are SOL inflation rewards and MEV rewards taxed the same?

Generally, SOL inflation rewards and MEV rewards are treated the same way by tax authorities: as income. MEV comes from a counterparty (another user paying a fee), while SOL inflation comes from no counterparty (hence the argument for newly created property).

How are native staking rewards taxed differently compared to liquid staking rewards?

Another way of staking is to contribute your SOL to a staking pool—a collection of multiple validators—in exchange for a liquid staking token (LST), such as hSOL.

When you hold hSOL, the staking rewards accrue to the token. That means you don’t receive reward transactions directly, and they don’t accrue income tax. Instead, the hSOL asset is treated just like any other token: it is taxed only when you sell for a profit.

What are the tax advantages of Liquid Staking Tokens?

Holding LSTs can have a few benefits:

1. You are in control of when your taxable events occur. If you don’t sell any tokens, you don’t typically owe any taxes.
2. Selling an LST is usually subject to capital gains tax instead of income tax. If you hold your tokens for more than a full year, most countries have a reduced long-term tax rate.
3. If you sell your tokens for a net loss, most tax authorities allow you to deduct that loss, offsetting other capital gains.

How do you calculate the Fair Market Value (FMV) of staking rewards?

The Fair Market Value (FMV) of your rewards transactions is equal to the total SOL received x the value of SOL in your local currency.

For example, if you live in the United States, and you receive 0.5 SOL on May 15, 2025, when SOL is trading at $169.50, you can calculate the FMV by multiplying 0.5 SOL x $169.50 = $84.75.

You’ll want to use reputable pricing sources like CoinGecko or CoinMarketCap to get the token price.

Calculating the FMV of your entire staking rewards transaction history can be extremely time-consuming. This is where crypto tax software like Awaken comes in handy and saves you time. It’ll synchronize your transaction history and calculate everything, making reporting easy.

Ordinary Income vs. Capital Gains

If you natively stake your SOL with a validator, your rewards transactions are taxed as income in most countries. If you hold an LST instead, the profit or loss realized when you sell the LST is subject to capital gains tax. If you don’t sell the LST in a given tax year, you won’t incur any taxable events on the rewards that accrue to the token.

Additionally, in most countries, capital gains tax is less than income tax, so holding an LST will often result in a lower tax obligation, especially for long-term holders.

The Jito Foundation has issued several legal analyses on the tax implications of staking via LSTs, including this one by Fenwick & West, which argues that:

"Minting & redeeming LSTs is not a taxable event, and staking rewards, as newly-created property, should not be taxed in the year they are received but rather upon a sale or other disposition."

Staking Rewards as Ordinary Income

Staking rewards received from staking with a validator are taxed at their FMV at the time of receipt. This means you will be taxed depending on your income bracket. This is important for high-income earners, who could find themselves owing high staking rewards in taxes.

Capital Gains/Losses Upon Disposition

If you choose to stake with a validator and accrue income taxes, you may also owe capital gains tax when you later sell or swap your SOL. For example, if you earn $100 of SOL as staking rewards, and then you later sell that SOL for $125, you would accrue $25 of capital gains.

When you sell SOL, your realized profit or loss is calculated as the sale price minus the cost basis (or purchase price).

So if you purchased 10 SOL for $55/SOL, and you sold it for $155/SOL, your capital gain would be $1,000.

When you earn SOL as staking rewards, the cost basis is equivalent to the FMV of the SOL you received when you received it.

What are the tax implications of selling staked SOL and SOL staking rewards?

There are three potential tax implications for selling your staked SOL (the principal), and your SOL staking rewards:

1. Short-term gains refer to tokens held for under a full year and sold for a net profit.
2. Long-term gains refer to tokens held for over a full year and sold for a net profit.
3. Capital losses refer to tokens sold for a net loss, which can be used to offset gains from other trading activities.

Long-term gains are taxed at a reduced rate in most countries around the world. Some countries, like Germany, encourage investors to hold their investments by making long-term gains tax-free.

Paying attention to the date that you originally purchased or received your SOL can help you significantly reduce your tax bill by avoiding short-term capital gains tax, which is typically taxed at the same rate as your income tax.

Awaken defaults to the FIFO (first-in-first-out) accounting method, which can help users realize long-term gains instead of short-term gains in some cases.

What are common taxable Solana staking events?

Over the full lifecycle of staking SOL, users can expect to incur a wide variety of taxable events. In this section, we’ll go over each possible taxable event, when it occurs, and how it is taxed.

Receiving Staking Rewards

This is an important point, so let’s reiterate it: each individual transaction where you receive staking rewards is its own taxable event. If you receive hundreds or even thousands of staking rewards transactions over the course of the year, each one is its own taxable event, and the fair market value of the tokens must be calculated for each transaction.

It’s important to keep detailed records of your entire transaction history, including the date/time each transaction took place and the FMV of the tokens received, to accurately report your taxes at the end of each year.

On the other hand, if you own an LST, you will not accrue staking reward transactions, and therefore, you will only be taxed when you ultimately decide to sell the LST. This reduces the complexity of tax lot tracking, defers taxable events, and even gives investors the opportunity to tax loss harvest if there is a dip in the market.

While MEV rewards automatically accrue to LSTs, native stakers must harvest (i.e. claim) their MEV rewards using apps like Jito’s MEV harvesting tool.

In this example, claiming MEV rewards will be considered a separate taxable event, and the FMV will be based on the moment you submit the claim transaction and receive your MEV rewards.

Selling or Trading Staked SOL (Principal)

Selling or swapping your principal (the SOL you originally purchased and staked) is another, separate, taxable event.

When you sell your staked SOL, you will realize a profit or loss, which you can determine by subtracting the purchase price (or cost basis) from the sale price. If you realize a net loss, it can be used to offset capital gains from other transactions.

Selling or Trading Earned Staking Rewards

When you receive staking rewards, they are subject to income tax based on their fair market value at the time of receipt. When you sell the SOL you received as staking rewards, it is also subject to capital gains tax, and is calculated the same way: sale price - cost basis = net profit/loss.

The cost basis of staking rewards is equal to the FMV of the tokens at the time you received them.

Auto-Compounding, Liquid Staking, and Earning Re-staking Rewards

When you stake SOL with a validator, your staking rewards are auto-compounded. This means your earned rewards are immediately added to your staked balance the moment you receive them, increasing your principal and future rewards.

Another, more complex form of staking involves restaking your staked SOL. Restaking involves taking your staked SOL, converting it into an LST, and staking the LST. Restaking means your SOL is being used to secure multiple networks. This adds complexity and increases your risk, but can also significantly increase your total rewards earned.

When you restake an LST like hSOL, you accrue staking rewards in two separate ways:

1. The underlying LST continues to accrue staking rewards to the value of the token.
2. You may earn incremental rewards on the platform where you stake your LST, similarly to how you earn staking rewards via staking SOL directly with a validator.

Any rewards received from staking an LST are treated as income and taxed just like standard staking rewards.

What is the tax treatment for Solana gas fees?

Any transaction or gas fee involved in the staking process (e.g., staking, unstaking, claiming rewards, etc.) is treated as expenses for tax purposes, and can be used to offset your rewards income.

That means if you spend $100 on gas fees in a calendar year, that $100 spent is considered an expense and deducted from your total income.

However, transaction fees are also considered disposals (relinquishing ownership of an asset), and usually result in a profit or a loss. Any gains or losses on transaction fees must also be reported on your tax returns as part of your capital gains reporting.

Businesses can also deduct MEV and priority fees if they are incurred as ordinary and necessary business expenses.

Reporting Solana Staking Income

Reporting income earned via staking is a relatively straightforward process. This section provides guidance on how to report staking income to the relevant tax authorities, focusing on common requirements and forms (US perspective).

What records should Solana stakers track?

When it’s time to file your taxes, you will need to report a detailed transaction history to the IRS, as well as totals, including:

1. The total quantity of SOL earned as staking rewards
2. The FMV of the rewards at the date and time they were received
3. Total transaction fees paid related to staking

It is also essential to keep a detailed record of your entire transaction history on the blockchain, including dates, transaction IDs, purchase and sale prices, rewards received, and fees paid.

Identifying and Using Relevant Tax Forms

When you stake SOL, you will likely be required to file multiple forms with the IRS.

Staking rewards income is reported on a Schedule 1 (Form 1040). If you later sell the tokens and make a profit, the associated capital gains/losses are reported on Schedule D and Form 8949.

Stakers will also need to file forms 1099-B and 1099-MISC. While Schedule 1, Schedule D, and Form 8949 are summary reports, 1099 forms report detailed information on individual transactions.

Form 1099-B is used to report information on each transaction with a capital gain or loss, while Form 1099-MISC reports every transaction where income was earned.

How Crypto Tax Software Can Help with Solana Staking

Most stakers and traders will rack up an extensive transaction history that is very manual to accurately report. Luckily, Solana tax software like Awaken automates this process.

Crypto tax software reads data from wallets and exchange accounts, syncs your entire transaction history, and provides you with a full, detailed accounting of every single transaction.

This means the FMV of every single staking rewards transaction, the capital gain/loss of every swap, and all gas fees paid are automatically calculated for you. All you need to do is review your transactions and download the reports.

Common Solana Staking Taxation Challenges

Crypto tax software can make your reporting experience much easier, but it is still important to carefully review your numbers to ensure accuracy before filing your return. Additionally, the crypto industry is still evolving, and some tax laws are not 100% clear. Generally speaking, it is usually better to err on the side of caution.

Bridging, for example, may seem like a non-taxable event to the average crypto user, but the IRS most likely views it as a disposal on one chain and a purchase on the other. That means bridging should actually be reported like a swap, not like a non-taxable wallet transfer.

Minting or redeeming an LST directly with its issuer can also be treated differently from swapping between the assets on an exchange. Fenwick & West argued that minting and redeeming LSTs are not taxable events, but that logic may not apply to swaps of the same assets.

Dominion and Control in Reward Receipt

“Dominion and control” refers to the moment you gain possession of an asset. If you swap USDC for SOL, you gain dominion and control the moment you receive the SOL in your wallet.

Staking rewards can be accrued in two ways:

1. A steady stream of rewards is added to your balance and auto-compounded. If this is how you earn staking rewards, the FMV must be calculated for each transaction at the time it is received.
2. Your rewards accrue steadily, but they’re not sent to your wallet until you claim them. If your rewards build up over time until you claim them (e.g. harvesting MEV from native stake accounts), the FMV is based on the moment you claim the transaction and receive the rewards.

Crypto tax software automatically tracks both of these methods of receiving staking rewards.

Dealing with Price Volatility and FMV Calculation

SOL is a volatile asset, so the FMV of your staking rewards can vary significantly from day to day and even transaction to transaction. Receiving .02 SOL today will most likely not have the same FMV and tax impact as receiving .02 SOL two months from now.

Lack of Clear Guidance and Evolving Regulations

Crypto tax laws vary around the world and are constantly changing. We can expect to see continued changes in how crypto is taxed for the foreseeable future as the industry continues to grow and regulations are implemented.

Every year, before you file crypto taxes, it is important to educate yourself about the laws in your specific jurisdiction. If you are ever unclear, it is best to consult a tax professional who can help you report accurately.

International Tax Implications: Staking Across Borders

It is rare to face any additional taxation if you stake with a validator in another country, but it’s not impossible. Staking rewards are ordinarily taxed in your country of residence, but the validator’s country could also claim the income as “source-based” service revenue, creating a risk of double taxation if treaty relief is unclear or absent. Meticulous records of each reward (value, date, validator fee) are essential so you can prove what you earned and offset any foreign tax.

Before selecting a validator, do your research. Read their website, follow them on social media, and understand where they are located, then determine if there will be any tax repercussions for staking with them.

Strategies for Managing Your Solana Staking Tax Liability

Now we’ll dive into some proactive advice on how to help you make more informed decisions year-round, not just at tax time. 

Year-Round Tax Planning for Stakers

As you accrue staking rewards, you should keep track of your compiling tax liability throughout the year. Again, you pay taxes based on the fair market value of your staking rewards at the time you received it. The best thing you can do to prepare is to set aside funds for taxes throughout the course of the year, as you earn.

If we enter a bear market, and you haven’t set aside funds in advance, you will find yourself having to sell an even higher % of your rewards in order to pay your taxes.

It’s also important to keep in mind that income earned via staking, just like interest earned in a bank account, can put you in a higher tax bracket.

Your tax bracket is determined by your total taxable income in a given year, meaning the income you earn from work, from interest in a savings account, from staking, and all additional income is added together to determine your total income and income tax bracket.

If you earn enough in staking rewards, you could end up in a higher tax bracket.

Tax Loss Harvesting (If Applicable to Staked Assets)

If the value of SOL goes down, you can reduce your tax bill by tax loss harvesting your tokens. When you swap your staking rewards for less than the FMV at the time you received them, you can use the loss to offset your capital gains from other trades.

Tax loss harvesting is a particularly valuable tool for US crypto traders, as the IRS treats crypto as property, and not as securities, which means that wash trading laws do not apply to crypto That means you can sell your SOL to realize a loss, then immediately buy it back. So if you have SOL, and the value is less than your cost basis, it may make sense to swap your SOL and realize a loss.

Even for non-US customers, in most countries around the world you can still practice tax loss harvesting by swapping SOL for an LST, like hSOL. Even though SOL LSTs are based on the same asset, they are technically different tokens, and you can most likely tax loss harvest by swapping between them.

The Importance of Consulting a Qualified Tax Professional

This article is informational, not financial or tax advice. We strongly recommend that you seek advice from a CPA or tax lawyer specializing in crypto. This is a complex field with constantly changing rules and regulations. Filing is difficult, and having a tax professional handle your crypto taxes is the best way to ensure you report accurately.

The Future of Solana Staking and Tax Regulations

As the industry matures, we are likely to continue seeing significant changes in the way crypto transactions are taxed. Currently, there is still debate about how transactions like airdrops, bridging, and DeFi transactions should be taxed. 

While staking rewards are currently taxed as income, many debate that received rewards should not accrue any tax burden until those tokens are sold, used to pay for goods or services, or otherwise disposed of.

Key Takeaways for Solana Stakers

Staking SOL can be a great way to earn rewards, but it also comes with tax responsibilities. 

To stay compliant and avoid surprises, it’s critical to track every transaction, calculate FMV accurately, and keep organized records. Tools like Awaken can automate this process, saving you time. If you have more questions, it’s always best to chat with a tax professional.