dYdX Tax Reporting
TokenTax imports dYdX data for easy cryptocurrency trade tracking and tax filing.
Overview of dYdX decentralized exchange
dYdX is a Decentralized Finance (DeFi) exchange founded in 2017. The exchange’s main objective was to create an open trading platform for all types of crypto asset products. On dYdX, you can trade crypto assets on margin and perpetuals; borrow using crypto as collateral; and lend your crypto while earning variable interest rates. The exchange also has a trading platform with portfolio tracking capabilities to follow your trading activity over time.
Taxes on dYdX transactions follow the same rules as other exchanges
Trading crypto for crypto and trading crypto for fiat result in capital gains (or losses) taxes on any exchange. The more complex cases arise from trading on margin and perpetuals, which involves the earnings or losses from the time of the initial purchase to the time of the disposition (trade or sale) of the crypto assets.
Additionally, dYdX allows you to lend and borrow with your crypto assets as collateral, which are slightly more complex activities from a tax standpoint. Interest earnings in particular are taxed income, separately from your typical capital gains on crypto.
You can read more about typical crypto tax treatment in the United States and other tax agencies on our crypto tax guide. Our DeFi tax guide goes through details of how taxes work for all frequently used DeFi protocols and the respective interest and governance tokens.
Ask us more about your individual trading situation on our chat (lower right corner) for quick tax support, too. Most of our team has traded on DeFi platforms, so we know what we’re talking about.
Crypto tax software advantages for traders, lenders and borrowers on dYdX
Particularly for DeFi protocols, you will want to use crypto tax software to standardize and sort out all of your trades. For example, crypto tax software will automatically import your dYdX transactions. It will also recognize your borrowing and lending activity separately for different tax treatment.
Once everything is standardized by the software, it will automatically calculate your tax liability for a variety of accounting methods specific to your country of residence’s regulations. You can then export your tax forms in a variety of formats to provide to your tax authority.
Trying to do this yourself is tedious and time consuming, especially if you traded on multiple platforms with any frequency. Ask our team for help with your individual tax situation on our chat (lower right corner).
How to save on your crypto taxes
Trading, borrowing and lending on dYdX can be profitable, so you will want to think about how taxes will eat into your profits from the beginning. One option at your disposal is to use year-end tax loss harvesting to sell off underperforming tax lots using a strategy typically implemented by hedge funds to reduce their taxes stocks, which are also treated as property the same as crypto assets. Additionally, the Internal Revenue Service (IRS) and many other national tax agencies have decided that specific identification accounting are acceptable, allowing you to make use of our proprietary minimization algorithm.
Ask us about how we can help you with your unique tax situation on our chat function. Particularly if you have used a variety of different crypto DeFi financial services, you will need a tax partner to figure out the different tax implications.