Synthetix Tax Reporting
TokenTax connects to Synthetix for easy crypto-currency trade tracking and tax filing.
Overview of the Synthetix DeFi platform
Synthetix is a Decentralized Finance (DeFi) platform that provides Ethereum chain-based synthetic exposure to currencies, commodities, stocks, and indices. It was founded by current CEO Kain Warwick in 2017.
On Synthetix, you can trade ETH for Synths sETH and sUSD. You can also borrow sETH as a loan. Holders of SNX tokens can use the Mintr application to mint Synths using SNX as collateral and burn Synths to gain SNX tokens. You can also claim fees on the Synthetix network by staking SNX tokens.
On Synthetix, you mint Synths by staking SNX (Synthetix Network Token). Synths, like sUSD or sETH, can be traded for other Synths, and you also receive rewards on your SNX staked and from your Synth trades.
How taxes work for Synthetix
Remember that all trades from crypto to crypto and crypto to fiat currencies are taxed. If you are new to crypto taxes, see our helpful introductory guide on crypto taxes in the United States and other countries. Our DeFi tax guide can also help you delve into understanding how your DeFi activities will be treated by the IRS.
Trading Synths (SNX tokens) on the Synthetix exchange is taxable as capital gains or losses at the time of disposition. Disposition can mean trading for Synth, trading for crypto, or selling in exchange for fiat currency. Staking SNX tokens for earnings is treated as interest income and reported separately on your taxes.
Please reach out to our team on our chat (lower right corner) to discuss your specific tax situation. Synthetix is a particularly tricky platform from a tax perspective, so it is best to reach out for help.
Minting Synths is, from a tax perspective, like borrowing crypto, so you don’t recognize any tax when you mint synths since you are using your SNX as collateral. However, you recognize any capital gain or loss on your Synths when you exchange or burn them.
SNX staking rewards and Synth trading rewards are taxed as income, per their quantity and market value at the time you claim them.
Why you need crypto tax software if you actively traded on Synthetix
If you trade on Synthetix, you likely traded on other exchanges and DeFi platforms as well. You therefore will need to aggregate, label and track all of the different types of transactions you made across different DeFi platforms. This is very time consuming and tedious to try to do yourself, whereas crypto tax software automates the process.
Additionally, crypto tax software automatically calculates your tax liability. You can automatically export your forms in whichever format you need for your country of residence and tax filing method (TurboTax compatible import file, PDF printable form, spreadsheet, etc.).
How crypto tax software can save you money
If you had large capital gains from trading on Synthetix and other platforms, there are a few tools you can use to save money on your tax bill. While you likely traded frequently and may not be able to save on taxes by taking advantage of the lower tax rates on long-held assets (over one year), you can use tax loss harvesting to strategically sell off tax lots in order to reduce your tax bill before year-end.
The Internal Revenue Service (IRS) and other tax agencies internationally have also allowed specific identification accounting, which allows you to track your purchase cost. Therefore, you can also use our TokenTax proprietary minimization algorithm to reduce your tax bill.