Do you have to pay taxes when trading or gaining crypto interest on BlockFi?
BlockFi is a crypto platform offering crypto trading, interest-earning, crypto loans, and solutions for institutions. If you’re in the US, using a platform like BlockFi could lead to taxable events, thus leading to crypto tax reporting requirements.
Today, we cover all the tax implications of trading crypto, gaining monthly crypto interest, and receiving crypto loans on BlockFi.
Do you pay taxes for trading crypto on BlockFi?
Yes. In the US, if you trade any cryptocurrency for FIAT (e.g., USD) or another cryptocurrency (including stablecoins such as GUSD), you’ll have a taxable event, subject to capital gain taxes.
In other words, if you trade your initially bought crypto for any of the 15+ available cryptocurrencies on BlockFi, you’ll have a taxable event. You have to calculate the gain/loss on each trade and report it.
The capital gains tax rate could be long-term (from 0% to 20%) if you have held the original crypto for more than 12 months or short-term (from 10% to 37%) if you have held for no more than 12 months.
Learn more about the taxes involved when trading cryptocurrencies.
Do you have to pay taxes for holding crypto in your BlockFi wallet?
No. Holding crypto is not a taxable event in the US.
You don’t have to pay taxes or do any crypto tax reporting if you only buy crypto with FIAT and hold it, for example, in your BlockFi wallet.
If you send it to another personal wallet or crypto account of yours, gift it to a friend, or donate it, you’ll also don’t have to pay taxes.
Learn more about crypto taxes when dealing with crypto wallets.
Do you pay taxes if earning crypto interest on BlockFi?
Yes. If you earn crypto interest in the US, you’ll have to determine its Fair Market Value (in USD) when you receive it and report it as ordinary income.
With BlockFi, your interest accrues daily, and there are monthly payouts. This means that you have to determine the Fair Market Value (in USD) each month at the time you receive each batch of interest. You’ll have to add the 12 monthly payouts at the end of the year and report it as ordinary income in your income tax return.
Learn more about the tax implications of receiving crypto interest in the US.
Receiving multiple batches of crypto interest increases the time and effort to track those FMVs. The easiest way to do so is to automatically import those earnings and have a crypto tax software like CoinTracking take care of the rest for you.
Learn how to import your BlockFi trades into CoinTracking by CSV:
Do you pay taxes if you take a crypto loan on BlockFi?
No. Receiving a loan in the US, whether in FIAT or crypto, is not a taxable event. You can take a crypto loan on BlockFi and receive it without the need for extra crypto tax reporting. However, you do need to track your loan basis, which is the FMV (in USD) of the loan proceeds you received, if you will be using the loan to do crypto trading.
Can you deduct the loan interest from your crypto gains or income?
It depends on what you use the loan proceeds for. You can potentially deduct the loan interest you paid if you used the loan proceeds to generate investment income (not including capital gains) if you qualify for an itemized deduction on your tax return. Please consult your tax advisor regarding your particular situation.
How to report your BlockFi taxes?
Any capital gains or losses that you generated during the tax year will have to be determined and reported on Form 8949 and Schedule D of your Form 1040.
Automatically track your gains/losses and generate the tax reports you need by quickly importing your BlockFi trades into CoinTracking by CSV.
If you gained crypto interest, you would have to pay income taxes on it at an ordinary income tax rate based on the total income you earned in that tax year, including your salaries, etc.
Learn all about reporting your crypto taxes.
Which taxes do you pay when using BlockFi?
Here are your tax obligations from using BlockFi:
- Trading any of BlockFi’s 15+ available cryptocurrencies: Capital gain taxes
- Receiving crypto interest: Ordinary income taxes
- Receiving crypto loans: No taxes
- Moving crypto from my BlockFi wallet to another personal wallet: No taxes.
The best BlockFi tax calculator: CoinTracking
The best crypto tax software to import and track your BlockFi 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 BlockFi, 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.
BlockFi 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.