Your Guide to Uniswap Taxes in 2023
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Uniswap is the most popular decentralized exchange (DEX) on the ETH chain, acting as an automated market maker to facilitate the trading of crypto without an intermediary.
Uniswap does not at time of writing provide a transaction history or tax reports. TokenTax makes filing your Uniswap taxes for the 2022 tax year easy with a Uniswap integration.
What is Uniswap?
Uniswap is a marketplace for digital assets such as ERC20s and NFTs. The Uniswap Protocol is an open-source protocol to provide liquidity for and trading of ERC20 tokens on Ethereum. It eliminates the need for centralized intermediaries and permits safe, accessible, and efficient exchange activity. In short, Uniswap is a decentralized finance (DeFi) protocol and marketplace.
Uniswap uses a set of smart contracts with liquidity pools to facilitate trades on its exchange. The project is open source and was developed by Hayden Adams, founder of Uniswap Labs. For the average crypto users, Uniswap is a way to make crypto transactions with ETH outside of a centralized exchange (CEX) and to maintain custody of their tokens while trading in and out of crypto.
How exactly does Uniswap work?
Uniswap acts as an automated market maker as a collection of smart contracts that define a standard way to create liquidity pools, provide liquidity, and trade assets. Every Uniswap liquidity pool contains two assets and tracks aggregate liquidity reserves and the pricing strategies liquidity providers set, with reserves and prices updated automatically every time someone trades.
Unlike CEXes, Uniswap has no central order book, third-party custody, or private order matching engine. Traders who use Uniswap can always buy or sell a token, in contrast to traditional exchanges which require matching trades with individual counterparties.
The benefits of Uniswap
For the average crypto user, the primary benefit of Uniswap is that it is decentralized. You’ve probably heard the phrase “not your keys, not your crypto” in relation to holding crypto on CEXes. As we’ve seen with the collapse of CEX FTX, this crypto truism isn’t an empty statement.
Those who want to hold their keys and their crypto benefit from Uniswap as a means of exchange while actually holding their crypto in a wallet they control. Uniswap is also easy to use, integrates with various crypto wallets, and requires no KYC or registration.
Do you pay taxes on Uniswap?
Crypto traded on Uniswap is subjected to the same rules as crypto traded on a CEX like Binance or Coinbase. It may be enticing to think your Uniswap trades are “private” because you don’t need to register and there’s no KYC to use it, but this can be misleading.
Note that you’re unable to swap with fiat directly on Uniswap. You will need an on- and off-ramp in and out of USD through the Uniswap Web App or other method. Everything is recorded on the blockchain. Simply put: yes, you have to report on and pay taxes for your interactions on Uniswap just like you do if you trade on a CEX.
Are there taxes on Uniswap trades?
Yes, tax implications are the same for trades on Uniswap as they are on a CEX. Note too some crypto projects include a “tax” as part of the contract, often to support the ongoing development and marketing for a given project, so there may be a fee for trading in and out of a given crypto. This “project tax” is of course distinguished from the taxes you pay to the IRS or similar body.
Tax rules for liquidity pool tokens and flash swaps on Uniswap
With Uniswap, crypto holders do not earn new liquidity pools tokens. Rather the value of your tokens increases based on fees earned within a pool to which you’ve added capital. In short, you’re not earning new tokens as you would when mining or staking crypto. Accordingly, the usual income tax rules likely do not apply here. That noted, when you remove your tokens from a given liquidity to, you’ll have realized a gain, likely subject to capital gains tax as a crypto-to-crypto transaction.
Flash swaps are treated like any other crypto transaction, as with these swaps you’re trading one token for another. The usual capital gains rules apply.
How are Uniswap airdrops taxed?
The IRS treats tokens claimed from an airdrop as income, which means you’re liable for income tax on the value of any claimed airdrop. This income is reported at the value of the asset when you took full control of it. Uniswap has performed two airdrops, one for $UNI and the other in $USDC upon their acquisition of Genie.
How to generate a Uniswap tax form
Uniswap does not at this time provide tax forms to their users. TokenTax integrates with Uniswap to simplify this process. With our platform, you simply import your Uniswap transaction history and our software does the rest so you don’t need to track Uniswap transactions by hand.
How to find your Uniswap transaction history
As of now Uniswap doesn’t provide an option on their platform to download a CSV file of transaction history. You might use Etherscan to generate and download your Uniswap transaction history, if you’re doing your taxes manually.
You might also have the option to download a CSV file directly from the crypto wallet you use while interacting with Uniswap.
TokenTax makes this process easy with our Uniswap integration. Just enter your ETH wallet address and you’re done. It couldn’t be simpler.
How to file your Uniswap taxes with TokenTax
With TokenTax, you can import data from every crypto exchange, blockchain, protocol, and wallet. Just sync your transactions via API or upload them in a supported CSV format and simplify your Uniswap tax reporting.
Filing Uniswap taxes with TokenTax couldn’t be easier. Simply sign up, connect your Web3 wallet and let our software do the rest. TokenTax allows you to import data from every crypto exchange, blockchain, protocol, and wallet. Just sync your transactions via API or upload them in a supported CSV format. And if you need additional support, we offer advanced reconciliation services from crypto-savvy tax professionals.
Frequently asked questions
Here are some answers to frequently asked questions about Uniswap taxes and Uniswap tax reporting.
Does Uniswap provide a tax report?
No, Uniswap does not provide a tax report at this time. For Uniswap tax reporting, you can download a transaction history from Etherscan or use TokenTax to prepare and file your Uniswap taxes.
Does Uniswap report to the IRS?
Uniswap does not report to the IRS and has no identification requirements or KYC process at this time.
Does Uniswap supply a financial statement?
Uniswap does not supply a financial statement to its users.
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