Compound Tax Reporting
TokenTax connects to Compound for easy crypto-currency trade tracking and tax filing.
Compound: crypto borrowing and lending
Compound, founded in 2017, is a U.S. based decentralized finance (DeFi) interest rate protocol allowing users to lend or borrow assets.
Compound’s mission is to allow all crypto holders to easily earn interest on their holdings (as you typically would with fiat currency), instead of letting their assets sit in wallets and exchanges without earning any interest. The protocol is used for borrowing and lending, and you can easily view the total supply and total borrowed of each market pool.
Tax implications of using Compound
If you traded on decentralized finance protocols, your transactions are still subject to taxes. For example, taxable exchanges made on Compound need to be reported on your tax Form 8949 for capital gains and losses.
The interest earned on cTokens is not taxed separately as interest earnings, but instead it is taxed as capital gains at the time you exchange the cToken for another asset or sell it for fiat currency. This differs from staking because the interest is accrued as part of the token value, instead of as separate interest income.
To learn more about taxes on decentralized finance platforms, read our DeFi crypto tax guide.
Benefits of crypto tax software
One of the major challenges of reporting your crypto taxes is that you need to consolidate and format all of your transactions into one standard. TokenTax addresses this by automatically integrating all of your DeFi activity across all protocols into your account.
Once you have all of your transactions in a standard format, crypto tax software automatically calculates your capital gain or loss using the required accounting methods and standards recommended by your local tax authority. From there, you can automatically export your forms in a variety of formats to submit to your local tax collector.
At TokenTax, we have been testing the tax implications of decentralized finance transactions for several years, and over half our team actively uses DeFi protocols for their own transactions. Ask us anything on our chat function (lower right corner), and we will help you with your individual tax situation.
Importing a Compound API into TokenTax
Add any ETH address(es) that you've used for Compound to TokenTax and your Compound transactions will be imported. We only require your public address and will never ask for private keys.
TokenTax supports all Compound activity, from interest income to COMP yield farming. Use our proprietary minimization accounting method to reduce your taxes and consider harvesting your losses at year-end to further reduce your tax liability.