Aave Tax Reporting
TokenTax imports Aave data for easy cryptocurrency trade tracking and tax filing.
What is Aave?
Aave is an open source Decentralized Finance (DeFi) protocol released in 2020, joining the Uniswap market in May of 2020. It is a non-custodial platform primarily for lending and borrowing. The Aave team aims to create a transparent and open infrastructure for DeFi money markets. The main uses of Aave are through its aTokens and LEND tokens.
aTokens allow you to earn interest on your deposits through Aave. You accumulate aTokens over time the longer you keep your crypto deposited. This is slightly different from cTokens on Compound, for which the individual tokens increase in value to provide you with interest on your crypto holdings.
Tax implications of Aave’s aTokens
The IRS has not issued guidance on aToken taxation, so there is ambiguity about whether depositing assets into their aToken equivalent is a taxable event. If you choose to consider this action a swap—and thus a taxable event—you realize tax liability at the time of the deposit. If you don't consider this action a taxable event, you do not. We recommend you speak to your tax professional before you decide on your approach. You can read more about this issue in our full DeFi tax guide.
If you earn aTokens from depositing your crypto on Aave and lending it out to borrowers, you are taxed the same as if you earned interest on a fiat money market account. In other words, it is taxed as income.
If you trade (or burn) aTokens for another crypto or sell it for fiat currency, you recognize capital gains on your disposition. The same is true if you trade another crypto for aTokens.
For examples of how to calculate your taxes for specific Aave use cases, our DeFi guide details all the specifics. Most of our team has used Aave themselves, so reach out to us on our chat function (lower right corner) to ask questions about your unique tax situation.
If you are concerned that you will have a large tax bill next year from your earnings using Aave, please ask us about how to reduce your tax bill before year-end. You may want to estimate your taxes in December to plan on having enough fiat currency on hand to pay your taxes. We can help out depending on your individual tax situation.
You can also read more about how your taxes on other platforms and exchanges function in our crypto tax guide for the United States and other countries.
Importing a Aave API into TokenTax
To sync all of your trades from Aave, add your ETH wallet address(es) in your TokenTax dashboard import tab. Via your ETH wallet(s), TokenTax will import and standardize all your transactions.