Uniswap taxes cover everything from DEX trades to liquidity pools. Today, we cover all the taxes involved in trading with Uniswap, the tax setting of the UNI airdrop, and the taxes in Uniswap liquidity pools.
Uniswap is the most popular decentralized exchange in the market and the motor of the DeFi emergence, while taxes related to its activities remain foggy for many traders.
The ETH-based decentralized finance protocol allows individuals to anonymously trade within a native crypto ecosystem, offering flexibility and efficiency. The anonymity, speed, and efficiency of new DEX solutions lead some crypto traders and enthusiasts to believe that these trades are not taxable, but that’s not the case.
How is Uniswap taxed?
In Uniswap, anyone can swap a token for another. In other words, you can execute crypto-to-crypto trades on Uniswap. From a tax perspective, crypto trades are taxable events in the US, whether you trade crypto for FIAT or another cryptocurrency.
As a result, Uniswap trades are taxed as regular crypto-to-crypto trades, resulting in a capital gains tax setting.
Do you have to pay taxes on Uniswap trades?
Yes. You’ll need to pay capital gains taxes if you have a gain from your Uniswap trades. You’ll need to determine the cost basis of the cryptocurrency you originally purchased and then calculate the gain in the trade.
Your capital gain is the difference between the Fair Market Value (FMV) when you sell for the new crypto and the original cost basis. However, these gains can be offset by other losses. For example, you can use crypto tax loss harvesting to offset your gains, but you’ll have to pay taxes if you have an aggregated gain.
The capital gains tax rate will depend on your holding period. If you held the original crypto for more than 12 months, you would get a tax-privileged coin and qualify for long-term capital gain treatment, resulting in a lower tax rate (from 0% to 20%). Long-term holding has various benefits for crypto investors across countries.
However, if you held that crypto for 12 months or less, you’ll have a short-term capital gain, resulting in a higher tax rate, ranging from 10% to 37% in the US.
Are swap tokens taxable? Decentralized exchange taxes
Swap tokens are essentially crypto-to-crypto trades, taxable in the US. For tax purposes, trading crypto in a decentralized or a centralized exchange is indifferent. If you have profited from swap tokens, you’ll need to pay capital gains taxes.
If you have capital gains from crypto-to-crypto trades, you’ll have to calculate gains and pay taxes on them. In the case you have losses, you’ll still need to calculate it and report it on your taxes. The good news is, you will be able to use your losses to offset your gains from other trades.
How to export Uniswap transactions?
Now you know that you have to report and most likely pay capital gains taxes on your Uniswap or other DEX trades. How to keep track of all these transactions?
Crypto-to-crypto trades increase the difficulty in reporting because of the ever-changing Fair Market Values of each cryptocurrency you’re swapping. As a result, the best way to keep track of these trades is to use crypto tax software.
With CoinTracking, you can easily import your Uniswap trades by pasting the ETH address that you use to conduct your trades in our ETH+DEX importer. After importing those trades, CoinTracking automatically calculates all the gains/losses for all of your trades, and you can generate the necessary tax returns.
Learn how to import your Uniswap trades into CoinTracking
How do I report Uniswap on my taxes?
After importing your Uniswap trades into a crypto tax software like CoinTracking, you can select the appropriate accounting methods to calculate your gains and generate the necessary tax reports to be compliant in your country.
In the US, all crypto-to-crypto and crypto-to-FIAT trades and you need to report them to the IRS. You need to report all your Uniswap trades on Form 8949 and Schedule D of your Form 1040. For more details on how to report your crypto taxes, please check this comprehensive guide.
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How are liquidity pools taxed?
Beyond crypto trading, Uniswap has popularized liquidity pools. On Uniswap, you can lock some of your crypto funds into pools and gain new tokens. Besides improving the platform’s liquidity, you can generate crypto passive income in this type of investment vehicle.
As liquidity pools are recent, the tax settings are still undergoing. Please refer to our DeFi taxes guide for more information on liquidity pool taxes.
How is the Uniswap airdrop taxed?
Uniswap dropped a generous amount of its native token – UNI – when the DEX launched. Airdrops are a taxable event in the US. You should recognize the Fair Market Value (in FIAT) of the total airdropped token amount when you receive it. Once the UNI rewards are in your control (in a wallet that you have access to), you’ll need to report that FMV.
If you didn’t report previous income, we encourage you to check our CoinTracking Full Service, where a certified crypto CPA can help you reconcile all your trades and put your tax reporting in order.
In the meantime, check out the guide on crypto airdrops and taxes to clarify any doubts concerning Uniswap airdrop taxes.
How to do your Uniswap taxes?
- Import your Uniswap trades with CoinTracking’s ETH+DEX importer.
- Calculate capital gains on your token swaps according to IRS-approved accounting methods.
- Generate tax returns with easy-to-use crypto tax software.
The Best Uniswap tax software: CoinTracking
CoinTracking covers all your Uniswap needs. If you’re an active DEX trader, you can easily import all your Ethereum and Binance Smart Chain-based trades from Uniswap, 1inch Network, SushiSwap, PancakeSwap, etc.
You can simply paste your ETH or BSC address into CoinTracking and import your trades and get your gains automatically calculated.
Moreover, CoinTracking can easily classify all your earnings from crypto staking, liquidity pools, earning crypto interest, and more, including:
- Importing (API & CSV) your trades from 110+ exchanges/wallets.
- 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.
- Generate complete Tax Reports in your country.
Want to submit crypto tax returns error-free? Check our Full Service in the US.
CoinTracking also offers a full service for US traders. A CoinTracking expert from Polygon Advisory Group, a leading crypto tax firm in the US, will review your account, fix any errors, and ensure you submit your tax returns 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 20+ 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.