Digital Asset PARITY Act Could Reshape Crypto Taxes in 2026

This article was first published on Deythere.

The push for crypto taxes reform across America is picking up steam as lawmakers rally in their bid to modernize the US’s approach to digital asset taxation, with attention centering on the controversial IRS treatment of staking rewards. 

A bipartisan group of representatives in the House has called for US Treasury Secretary Scott Bessent and the Internal Revenue Service (IRS) to revisit a notice that treats staking rewards as income at the time they are earned rather than realized. 

Legislators Call For Immediate IRS Review Of Staking Tax Rules

House Republicans led by Rep. Mike Carey (R-Ohio) sent a formal letter calling for Treasury Secretary Scott Bessent to examine and revoke a 2023 IRS tax rule that taxes all cryptocurrency staking rewards as ordinary income when they are received. 

The rules, were they to be allowed to continue through 2026, would place unjust tax requirements on stakers and would punish participants just for participating in security of the network, lawmakers wrote.

As sources reported, the missive explained that proof-of-stake networks, like Ethereum, incentivize users who stake tokens to validate transactions and protect the network. 

Nevertheless, under the IRS rules, rewards are taxed when they land, a mandate many in the industry say results in “phantom income,” where people owe taxes on rewards before they’re able to sell or realize any value. 

“Network security and American leadership requires taxpayers to stake those tokens, but today the administrative burden and prospect of overtaxation discourages that participation,” said Representative Carey.

Bipartisan Proposal Calls for More Comprehensive Crypto Taxes Plan

While the letter demanding an immediate IRS review is focused on staking, other lawmakers have been working to expand their proposed crypto taxes reform by releasing draft legislative text that would also target small-value transactions and stablecoin use. 

Reps. Max Miller (R-Ohio) and Steven Horsford (D-Nev.) showed the Digital Asset PARITY Act, a discussion draft bill intended to modernize certain portions of the Internal Revenue Code to account for the increasing importance of digital assets in commerce and investment.

Under this draft, any transactions made with a regulated U.S. dollar-pegged stablecoin of less than $200 per payment would be allowed and exempt from capital gains tax. 

It’s meant to help regular people who use crypto every day for payments, remittances and so on, from having to deal with the headache of complex tax calculation. 

The proposal would also afford the flexibility to defer staking and mining rewards for up to five years, instead of recognizing income on receipt.

The draft also includes sections that would apply securities tax principles, like wash sale rules, to digital assets and provide mark-to-market accounting for well-seasoned traders, based on a report from Bloomberg. 

Industry and Lawmakers’ Reasoning for the Push

Advocates for crypto tax reform argue that the current tax environment creates unnecessary complexity for taxpayers and operators within the digital asset ecosystem.

Critics of current IRS guidance argue that staking rewards, unlike a salary or other form of earned income, may not be immediately usable without first liquidating assets, making it more like investors are being taxed on income to which they don’t have access. 

This concern was also reflected in the letter to Treasury, which stated that administrative costs and potential double taxation may dissuade stakers from participating while undermining U.S. leadership in blockchain innovation.

“Cryptocurrencies need guardrails that allow innovation to grow while protecting consumers and the integrity of our tax system.” Representative Steven Horsford said.

Political Setting and Wider Lawmaking Debate

In addition to the staking and stablecoin provisions, Lawmakers’ work this year also included the successful repealing of the DeFi Broker Rule, which had required decentralized finance platform operators under the old Internal Revenue Service regulation regime to send detailed information from transactions directly to the IRS. 

Representative Carey, who spearheaded that repeal push in early 2025, said at the time that the rule needlessly hindered American innovation and made it difficult for investors to provide the capital entrepreneurs need to start and grow their businesses.

 With few legislative windows before the end of the year, observers said, action in December 2025 could determine tax filings and reporting for the next tax season.

Conclusion

The conversation around crypto taxes reform in Washington is heating up as lawmakers clamor for changes to how staking rewards are treated by IRS and more updates to the tax code itself before 2026 taxes. 

Both immediate IRS guidance updates and legislative proposals, such as the Digital Asset PARITY Act, suggest that more lawmakers recognize that the existing tax treatment of digital assets may be outdated or burdensome. 

As these debates play out before the end of this year, voices from across the industry are paying close attention and acknowledging that tax policy will be crucial or U.S. leadership in the digital economy.

Glossary

Crypto taxes reform: The push to change the way digital asset transactions, including staking rewards and income, are taxed in the U.S.

Staking rewards: Tokens received for helping to secure and validate a proof-of-stake network.

IRS guidance: Guidance provided by the Internal Revenue Service explaining tax law for particular circumstances.

Capital gains tax: Tax on profit from sales of a capital asset.

Stablecoin tax safe harbor: Proposed exemption for small stablecoin transactions from capital gains.

Frequently Asked Questions About Crypto Taxes Reforms

What do members of Congress want the IRS to alter?

They are calling for the IRS to reconsider how staking rewards are taxed, saying that current rules tax consumers on income before they’ve actually received it.

Who is behind the push for crypto taxes reform?

Representative Mike Carey is a strong advocate for near-term IRS review, and Representatives Max Miller and Steven Horsford introduced an alternative tax proposal.

What is the Digital Asset PARITY Act?

It’s a discussion draft on stablecoin tax exemptions and a staking reward deferral option to modernize the outdated tax code.

When would changes take effect?

Changes are targeted to tax years starting after Dec. 31, 2025, for people filing in 2026.

Is this true of all digital assets?

Stablecoin safe harbor would apply to regulated U.S. dollar-pegged stablecoins under $200 per transaction, while staking changes might impact proof-of-stake assets such as Ethereum.

References

Benzinga
Decrypt
The Block
The Star
Mike Carey