Are you trading on Binance and worried about taxes? Binance is the most popular exchange for crypto trades worldwide, with several features from spot trading to a recent NFT marketplace.
However, different crypto activities there could lead to distinct tax treatments that you should be aware of before starting. Today, we cover all the taxes involved when using Binance.
Binance US taxes
Many US residents were trading on Binance until recently, but Binance no longer supports US residents.
Today, we cover all the tax implications for US customers who were using Binance until the ban and who need help with reporting past crypto operations. We’ll be covering everything from receiving staking rewards from Binance, trading NFTs, trading crypto, to many more operations you can do with Binance.
How are crypto trades on Binance taxed?
If you trade crypto on Binance, you’ll have to report your trades, and you’ll be subject to capital gains taxes in the US.
In the US, according to the IRS, every crypto-to-FIAT or crypto-to-crypto trade is a taxable event, subject to capital gains taxes. With Binance, you can trade hundreds of pairs of cryptocurrencies against other cryptocurrencies/stablecoins/FIAT.
In all those scenarios, you’ll have to pay capital gains taxes if you have a profit. Your cost basis will be the price at which you acquired the initial crypto, and the capital gain/loss will be the difference between your sales proceeds for the trade and your cost basis.
Don’t forget that even trading crypto for a stablecoin or a stablecoin for another stablecoin is a taxable event in the US, which you need to report even if the gain/loss is marginally small. Learn more about trading stablecoins and their taxes.
How are crypto margin trades on Binance taxed?
You’ll have to pay capital gains taxes if you have a profit from spot trading, margin trading, or futures. If you’re using leverage, your cost basis is the same as if you weren’t using it, but the chances for profit/losses are much higher, so the only difference will probably be your higher capital gains tax to pay if you have a great win from a margin/future trade.
Are Binance fees tax deductible?
Tax treatment for fees you paid on Binance depends on the nature of the fee. If it’s a trading fee, you will be able to use it to offset part of your sales proceeds, thus reducing your capital gain (or increase your loss). If it’s a transfer fee, it’s considered an investment expense, not tax-deductible for individual investors under the current tax law.
Please note that if you are using a third coin in a crypto-to-crypto or crypto-to-FIAT trade (e.g., paying the trading fee in BNB for a BTC-to-SOL trade), you should treat it as a deemed sale of the third coin for FIAT, then immediately use the deemed sales proceeds to pay for the trading fee.
In other words, a capital gain/loss will most likely need to be recognized for using a third coin as a trading fee, which is calculated based on the FMV (in USD) of the coin and your basis in the coin.
Is income from Binance taxable?
If you earn crypto income from Binance (e.g., interest-earning vehicles, staking rewards, referral bonus, etc.), you’ll need to recognize the Fair Market Value (in USD) of the income when you receive it. Then, you’ll have to report it on your income tax return.
Let’s look into more details on the different forms you can earn crypto income from Binance.
Do you have to pay taxes on Binance earn?
In the US, if you receive interest in crypto or FIAT from Binance Earn, you’ll have to recognize that interest as ordinary income. At the time you receive the interest, you must determine its Fair Market Value (in USD) and report it as ordinary income when filing your income tax return.
Learn more about taxes when earning crypto interest.
Do staking rewards on Binance count as income?
In the US, if you receive crypto staking rewards from Binance locked staking, flexible savings, ETH 2.0 staking, or any other vehicle from Binance where you earn rewards, you’ll have to pay income taxes on it. In the US, you must determine the Fair Market Value (in USD) of the crypto rewards at the time of receipt and report them in your income tax return.
Learn more about taxes when receiving crypto staking rewards.
Are NFT sales on Binance taxable?
Binance recently launched its NFT marketplace, where you can sell your creations or trade NFTs. In the US, trading NFTs is a taxable event, subject to capital gains taxes.
As a result, if you trade NFT for FIAT, stablecoins, or any cryptocurrency, you’ll have to determine the gain/loss on those trades and report them on your tax return.
However, if you’re an NFT creator and you sell your art on the Binance NFT marketplace, you’ll have to recognize those sales proceeds as ordinary income and report it on your income tax return. Being an NFT creator has different tax reporting requirements than trading NFTs/crypto as an investor. Check our NFT tax guide for more information.
Do you pay taxes if you spend crypto with a Binance Visa Card?
Spending crypto to pay for products or services through a debit or credit card is a taxable event in the US. When you buy a product with crypto, you’re treated as if you are converting that amount of crypto to FIAT. Such a transaction is a taxable event in the US, subject to capital gains taxes.
You need to determine the Fair Market Value (in USD) of that amount of crypto when you first bought it. The sales proceeds are the amount of crypto sold at the time when you buy the product. The difference between the two is the capital gains you’ll have to report and pay taxes on.
Learn more about the tax implications of spending crypto on products or services.
Can you get a deduction from a Binance crypto loan?
If you take a crypto loan in the US, you can deduct the interest expense, if it is considered investment interest, against your investment income, such as interest or staking income. In that case, you can deduct the interest expense on your tax return if you claim itemized tax deductions.
There are more ways to reduce your crypto tax bill in the US, including crypto tax-loss harvesting or holding crypto in the long term to get a reduced tax rate.
Check this guide on how to reduce crypto taxes.
Binance tax reporting
You need to report all the gains and losses from crypto trades and income that you receive from Binance on your tax return.
If you have gain/loss from crypto trading, NFT trading, or trading crypto on a BSC decentralized exchange, you’ll have to report those trades on your tax return and pay taxes on your capital gains.
If you received any income from earning interest on Binance, received an airdrop in your Binance wallet, gained staking rewards, or gained income from selling your NFT creations on the Binance NFT marketplace, you’ll have to determine the Fair Market Value (in USD) of your income when you received it and report it on your income tax return.
Using a crypto tax software like CoinTracking can make it easier to track all your different types of income and trades and determine the FMV of your income and gain/loss from your trades.
There are several ways to export your transactions from Binance and import them into CoinTracking. Watch this video to learn the steps:
Does Binance give you a 1099?
Binance does not issue a 1099 form to its customers because it is not a US-based exchange, and it no longer serves U.S. customers.
Does Binance report to tax authorities?
Binance is not a US-based exchange, and it does not report anything to the IRS. However, Binance US may comply with the US tax law and provide tax reports to the IRS.
The best Binance taxes calculator: CoinTracking
The best crypto tax software to import and track your Binance trades is CoinTracking.
You can import your trades using CSV or API, track your gains/losses, and generate tax reports according to your preferred accounting method.
Beyond Binance, CoinTracking is your full crypto tax solution for:
Moreover, CoinTracking can easily classify all your earnings from yield farming, liquidity pools, crypto staking, and much more.
Do you pay taxes on Binance?
Yes. Depending on your crypto activity, you’ll face a different tax treatment in the US for using Binance.
In summary, you’ll have to pay the following taxes:
- Trading crypto for other cryptocurrencies: Capital gains taxes
- Converting crypto for FIAT: Capital gains taxes
- Trading crypto for stablecoins: Capital gains taxes
- Trading NFTs as an investor: Capital gains taxes
- Selling NFTs as an NFT creator: Income taxes
- Receiving staking rewards: Income taxes
- Receiving interest from Binance Earn: Income taxes
- Trading crypto on BSC decentralized exchanges: Capital gains taxes
- Receiving airdrops from BSC decentralized protocols: Income taxes
Binance taxes with no errors: CoinTracking Full Service in the US.
CoinTracking also offers a Full Service for US traders. A crypto reconciliation tax expert from Polygon Advisory Group, a leading US crypto tax firm, will review your CoinTracking account, help fix any errors, and ensure you submit your crypto tax reports error-free.
This post is part of the Crypto Taxes AMA series. Follow our weekly AMAs on Twitter where our expert CPA, Sharon Yip answers your crypto tax questions. You can download 30+ AMA crypto tax reports for free.
Disclaimer: All the information provided above is for informational purposes only and should not be considered as professional investment, legal, or tax advice. You should conduct your own research or consult with a professional financial advisor when investing.