- The IRS issued Revenue Procedure 2026-20 on October 6, 2026, allowing qualifying crypto trusts to stake without losing specified tax classifications.
- The safe harbor does not make rewards tax-free; trusts must allocate staking rewards to investors proportionally after expenses.
- Existing qualifying trusts have six months to transition from the previous safe harbor and adopt the revised requirements.
The Internal Revenue Service issued Revenue Procedure 2026-20 on October 6, 2026, letting qualifying crypto trusts stake proof-of-stake assets without losing their federal tax classification. The protection is conditional.
It preserves treatment as an investment trust under Treasury Regulation §301.7701-4(c), and as a grantor trust under Internal Revenue Code §§671 and 677. It does not make staking income tax-free.
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The procedure applies to tax years ending on or after October 6, 2026. Its safe harbor addresses the trust’s classification when it stakes, not whether investors owe tax on rewards.
That distinction sets the limits of the relief. Eligibility depends on how a trust is organized, what it holds, and how it conducts staking.
Exchange listing, custody and staking purpose all shape eligibility
A trust must be formed under applicable state law and already meet the requirements for both federal tax classifications. Its interests must trade on a U.S. national securities exchange.
It must disclose its staking activity through an effective SEC registration statement and comply with applicable exchange rules. The portfolio is restricted: the trust may hold cash and units of just one type of digital asset.
That asset must operate on a permissionless proof-of-stake network. One or more custodians must hold it and control the relevant wallet addresses and private keys.
The custodians must work with third-party staking providers. Their arrangements with the trust and providers must be arm’s-length. Generally, neither the trust nor its sponsor can be related to a staking provider.
The trust must make its digital assets available for staking while retaining reasonable liquidity and operational reserves. Staking must serve to protect and conserve trust property.
The stated purpose includes reducing the risk that another party gains control of a majority of the network’s staked assets. The trust retains ownership of the staked assets for federal tax purposes.
Rewards remain taxable and must be passed through on a timetable
The safe harbor does not remove tax on staking rewards. It also leaves open how and when staking income is recognized.
Rewards must be additional units of the same digital asset held by the trust. The trust must allocate them proportionally to investors after trust expenses.
A trust may distribute rewards in kind, sell them and pass investors the cash, or combine those approaches. It must distribute them no later than 60 days after the calendar quarter in which it obtains control of the rewards ends.
Other issues remain outside the guidance. It does not resolve unrelated-business income, forks, airdrops or the tax treatment of other digital-asset transactions.
Existing trusts can keep the old safe harbor during a six-month switch
Existing qualifying trusts have a six-month period beginning October 6, 2026, to adopt the revised requirements. They can amend their trust agreements, change procedures, or do both.
During that transition, trusts that complied with Revenue Procedure 2025-31 may continue relying on it. The new procedure replaces and supersedes the earlier safe harbor.
Reliance on the 2025 procedure ends after the transition period. The new requirements therefore give existing trusts a defined window to revise their documents and operations.
This article is for informational purposes only and does not constitute tax advice. Consult a qualified tax professional or CPA about your specific situation.
