OlympusDAO Taxes Guide

OlympusDAO birthed the DeFi 2.0 movement, offering high rewards for investors, but it also created more concerns with taxes.

OlympusDAO and other rebase token protocols own liquidity instead of renting it, having many treasury assets backing its issuance. This way, OlympusDAO can offer high staking rewards.

For investors, introducing a rebase mechanism that generates staking rewards roughly every 8 hours increases the tax reporting complexity.

This week, we explore how to do your OlympusDAO taxes, from staking to bonding.

Do you pay taxes on staking rewards from OlympusDAO?

Yes. Earning staking rewards from a rebase token protocol like OlympusDAO is a taxable event in the US. Every time you receive a batch of staking rewards from OlympusDAO, you have to determine its Fair Market Value (in USD), and that will be the income you’ll have to recognize on your tax return.

Since OlympusDAO and other rebase protocols offer rewards roughly every 8 hours, this increases the difficulty in tracking all the FMVs of different batches. You can use crypto tax software like CoinTracking to resolve this issue.

Do you pay taxes from bonding on OlympusDAO?

It depends. When you bond, you’re essentially buying OHM at a discounted price and locking it for five days. At the end of the five days, you can simply hold, stake, or sell your newly acquired OHM. If you sell OHM for another cryptocurrency or FIAT, you’ll enter a capital gains setting. If you stake your OHM, you’ll receive rewards, and you’ll have to recognize ordinary income. However, when you bond on OlympusDAO, you’ll have auto-staking enabled, receiving rewards while bonding, and you can claim them at the end of each term. Every time you receive the rewards, you must follow the process above: determine their FMV and report it as ordinary income.

If you buy OHM with another cryptocurrency, it is a taxable event. You are trading one cryptocurrency for OHM. You’ll have to recognize the cost basis of the initial cryptocurrency you’re using to trade for OHM. The sales proceeds are the FMV (in USD) of all the OHM you’re now buying. The capital gains for this operation will be the difference between the two.

Can you deduct transaction fees from your OlympusDAO income?

If transaction fees on OlympusDAO are considered a trading fee, then you can deduct it from your sales proceeds and effectively reduce your crypto tax bill.

However, if the transaction fee is not related to a trade, it’s considered an investment expense, which is not deductible for individual investors.

How to report OlympusDAO on taxes?

Rewards from OlympusDAO are taxed at an ordinary income level. Here’s how you report OlympusDAO on your yearly taxes:

1. Import your staking rewards into a portfolio tracker/crypto tax software like CoinTracking;
2. Determine the Fair Market Value (in USD) of each batch of your staking rewards;
3. Declare all the aggregated income you received during the year from OlympusDAO as ordinary income.

CoinTracking can help you manage all the different batches of staking rewards you receive from rebasing protocols like OlympusDAO, Wonderland, KlimaDAO, and others.

Check our blockchain address importers, allowing you to import your trades from rebasing protocols based on the blockchain they operate on (e.g., Ethereum, BSC, Avalanche, Solana, etc.).

For more details on crypto tax reporting on rebasing DAOs, check out this guide detailing all the steps.

Learn how to import your OlympusDAO rewards with our ETH blockchain importer:

The OlympusDAO tax software: CoinTracking

The best crypto tax software to import and track your staking rewards from OlympusDAO 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 OlympusDAO, CoinTracking is your full crypto tax solution for:

• Importing (API & CSV) your trades from 110+ exchanges.
• DeFi and NFT support with our ETH+DEX importer.
• Importing your Binance Chain, Binance Smart Chain, and MATIC transactions.
• 25+ advanced reports, including which coins offer you a tax-free rate.
• Automatic capital Gains, according to 12 accounting methods (e.g., FIFO, LIFO, HMRC, ACB), accepted worldwide.
• Generating complete Tax Reports in your country.

Moreover, CoinTracking can easily classify all your earnings from yield farming, liquidity pools, crypto staking, and much more.

OlympusDAO 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.