How Taxes Work for Crypto Margin Trading and Lending

If you’ve ridden into the depths of margin exchanges like Bitmex, loan and lending services like Nexo, or decentralized Ethereum networks like Compound, then you’re probably wondering how to handle your taxes. TokenTax can help you incorporate activity on these platforms into your crypto tax filing. 

Crypto margin trading taxes

Margin trading is when you borrow funds from either the exchange or from other exchange users in order to trade larger positions with the ability to go long or short. You are tax liable for any gains you make while margin trading. 

If you lose assets in a margin call or liquidation, those detract from your margin profits. Crypto lost in margin trading either via closing a position at a loss or a margin call / liquidation is treated as a sale, meaning you recognize any capital gain or loss on that crypto. 

Popular trading cryptocurrency exchanges that we support include Bitmex, Deribit, Bybit, Bitfinex, Kraken, and Poloniex. 

How taxes work for crypto lending

You can lend crypto to people via centralized sites as well as decentralized ethereum-based platforms.

Certain crypto exchanges like Bitfinex also allow users to lend their crypto out to others to use it for margin trading.

When doing such lending, you receive interest in crypto. This crypto is taxable as income and thus the USD equivalent value should be included on your tax return. 

You can import that data into TokenTax, whether by CSV upload or manual entry, to automatically calculate the amount of USD income that you must report (link to how to report crypto taxes article).