Cardano Staking Rewards and Your Taxes
It’s all fun and games until the tax man comes!
With all the excitement about earning rewards on your ADA, you might forget to ask yourself how staking rewards are supposed to be counted and reported on your taxes.
Now this of course will vary according to your country, and we are certainly not tax professionals, but we consulted with one and learned how this stuff is counted in the U.S. And we’re fairly sure this is not too far off from how other countries do it as well.
Now normally, when you BUY crypto, the only thing you have to think about is how much it APPRECIATES in price. That difference between what you bought it for and what it increases in value to is taxed as CAPITAL GAINS.
However, when you are earning new crypto coins seeming out of thin air (rather than buying them) the situation is different.
In the U.S., the price the coin was at AT THE TIME YOUR EARNED IT, is taxed as ORDINARY INCOME (whatever that tax rate is for your income bracket). And then if the coin appreciates in price, that difference is taxed at a CAPITAL GAINS tax rate.
You earn 1 ADA at 10:32 AM on July 11th, and the average price of that coin on CoinGecko is $0.20. That 20 cents is taxed and treated as ORDINARY INCOME.
A month later you decide to sell that 1 ADA coin and it is now worth $0.50. That extra 30 cents is taxed as CAPITAL GAINS. However, the exact tax rate on that part is determined by whether it is considered SHORT-TERM capital gains or LONG-TERM capital gains.
Short-term: If an asset is held (or owned) for a year or less before it is sold, then any capital gain is considered short-term. Short-term capital gains are taxed differently than a long-term capital gain. Short-term capital gains are taxed at your ordinary tax rate, or in other words, your tax bracket for the given tax year.
Long-Term: If an asset is held (or owned) for more than one year, then any profit from the sale of the asset is considered a long-term capital gain. Long-term capital gains tax rates are 0%, 15% or 20% depending on your taxable income and filing status. They are generally lower than short-term capital gains tax rates.
Now, all of that is well and good, but if the stake pool is dumping varying amounts of ADA into your wallet every day, how the heck are you supposed to figure out, when tax time comes the next year, what the accurate price was for EACH SEPARATE deposit you received (i.e. the ORDINARY INCOME part) without being psychic or tearing your hair out??
Well, as a member of the Cardano Staking Club Pool you have access to a special tool we built just for our members, that makes your life easier by tracking all this info for you!
Our Solution - ONLY for Members of This Pool
What we did is build a special tool that monitors and records every deposit we make into our members’ wallets (i.e. the people who are staked to our pool). This tool automatically records the amount of ADA deposited, the precise time it was deposited AND the exact price that ADA was worth at that time, based on the average market price.
Any time you want to check on YOUR information, you can visit the tool HERE, copy and paste the your wallet address you are staking from, and you will see your specific deposit history. You can also adjust for your time zone and currency and even download a CSV file of this data whenever you want to!
It is our hope that this adds some additional value to you, as our members, as a token of our appreciation of you deciding to stake with us.
Chris & Fahad
If you’d like to delegate to our pool once the Cardano Mainnet is live, please sign up for our email list and we’ll notify you just as soon as our pool is ready for staking.