Two things in life are certain, and there's no need to repeat them. But do they need restaking? We’re referring to taxes here—death, the other certainty, isn't something restaking can offset. Taxes, on the other hand, might be reducible. Since capital gains are calculated in many regions based on asset liquidation, it's best to avoid selling crypto assets when possible, as this triggers a taxable event. By holding onto these assets, you’ll still owe taxes on any income generated from staking, but the assets themselves remain free from tax liability, at least temporarily. This allows you to postpone a hefty tax payment while still benefiting from holding your crypto longer. There are several reasons to consider restaking, from supporting the decentralization of blockchain networks to earning valuable staking rewards. However, when it comes to minimizing taxes, there’s an even stronger reason to delve into this rapidly growing area of blockchain. While taxes are unavoidable, they can be reduced with some smart planning, and that's a good place to start. Here’s how restaking can help with that. Understanding Cryptocurrency Taxation Before we proceed, here’s a tip: tax rules for crypto vary not just by country but sometimes by region. Therefore, the advice here is for general guidance only. To tailor it to your own situation, consult your country’s tax laws or, even better, talk to a tax professional. Ideally, they’ll be familiar with crypto, so you don’t have to explain concepts like staking and restaking. Much like other dreaded tasks, such as cleaning out the garage or going to the dentist, figuring out crypto taxes is something many avoid until the last minute. While crypto tax calculators have made what used to be a complicated process much easier, it's still a stretch to call tax preparation enjoyable. But, with some foresight, it doesn't have to be stressful, especially if you’re holding a significant portion of your wealth in staking protocols. With restaking, you invest an asset like ETH or BTC into a protocol to earn extra rewards while keeping the original token intact. On Ethereum, for instance, EigenLayer allows restaking by letting staked ETH or liquid staking derivatives (LSDs) like stETH or rETH be reused across multiple networks. Mantle , an Ethereum Layer 2 network, utilizes EigenLayer’s restaking to secure its roll-up processes. On the Bitcoin side, restaking is gaining traction through protocols built on Babylon, a leading decentralized BTC staking layer. SatLayer , one of the initial restaking protocols on Babylon, allows Bitcoin holders to stake their BTC and earn rewards for securing other networks. Considering the immense potential to unlock Bitcoin’s trillions in idle capital, alongside the numerous networks—including EVM—that can be staked using the most robust crypto asset ever created, it's clear that Bitcoin restaking is poised to become significant. And this brings us back to the topic of taxes. Knowing how tax laws treat restaking can be the difference between a small and a substantial tax bill. Restaking isn’t tax-free, but the process generally only subjects you to capital gains tax, which tends to be less burdensome and delayed. So how does this work in practice? Restaking Crypto: Boosting Returns, Cutting Taxes From a tax standpoint, the differences between staking and restaking aren't significant: the fundamental process remains the same whether you're staking a primary L1 asset—like ETH—or a secondary LST, such as stETH. In both cases, tax authorities see the same outcome: you still own the original token and might benefit from its value increase while earning additional rewards. During the year, you should be taxed only on these rewards. You don’t need to be a financial expert to realize that a 30% tax on $10K in restaking rewards is far less painful than 30% on a $100K asset. Restaking typically increases your holdings with extra tokens, potentially leading to compounded gains over time. However, how those rewards are taxed is crucial. In the U.S., for example, if staking rewards are taxed as income when received, you may owe taxes for that year. If you later sell those rewards at a profit, you face capital gains tax on the difference. In the U.K., if considered income, staking rewards might be taxed according to your income level, but any further increase in value upon sale is subject to capital gains tax. Hold and Delay One of the key strategies for crypto holders to manage tax liability is to avoid selling their crypto assets too soon. Restaking can be a powerful method for investors looking to expand their portfolios without triggering frequent taxable events. By staking assets like BTC or ETH, you remain open to potential price growth while earning more rewards. In many regions, capital gains tax is only due when you sell the asset. By holding onto your tokens, you postpone the point at which this tax is applied. From a tax perspective, this is essentially the bullish case for restaking. It offers a way to delay and defer your tax responsibilities, leaving more funds in your wallet or crypto holdings in your portfolio. And that’s always a good thing. Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
