When you take advantage of rewards by locking your crypto in staking protocols—whether on a centralized platform or a decentralized on-chain solution—it’s important to properly manage the related transactions to accurately calculate your gains and profits.
Read this article to learn how to manage your staking activity correctly.
How to manage staking transactions
Staking of Currency
Staking is represented by a withdrawal/outgoing transaction (whether to an on-chain contract or an exchange) and must be categorized under the Staking transaction type. Using this category excludes the transaction from capital gains calculations, making it fiscally irrelevant.
Here's an example of a transaction representing the locking of the currency in a staking protocol, where no capital gain/loss is calculated
Receiving staking rewards
Rewards earned from staking are usually received on a regular basis (daily or weekly, depending on the protocol/platform used) and are recorded as deposit/incoming transactions categorized under Staking.
Here's an example of staking rewards transactions
Return of Funds at the End of the Staking Period
At the end of the staking period, the initially locked amount will be returned, resulting in a deposit/inflow transaction that should be categorized as Trading.
Here's an example of a transaction of unstaking and unlocking of the funds
Complete overview of staking management
The image below illustrates the full staking management process, from the initial currency lock-up to the receipt of rewards and the final return of the locked amount.
Summary:
The withdrawal transaction for staking lock-up and deposit transactions for receiving staking rewards must be categorized as Staking.
The deposit transaction for the return of the initially locked amount must be categorized as Trading.