How is DeFi taxed?

DeFi is taxed in the US using the same rules that apply to all crypto. The IRS treats digital assets as property, so trading, earning and spending through DeFi apps can create capital gains, losses or income. The IRS has not said how many DeFi actions, such as adding to a liquidity pool, should be treated.

What DeFi activity is clearly taxable?

Some steps are settled by existing IRS guidance:

• Swaps. The IRS says exchanging one digital asset for another that differs materially in kind or extent is a disposal that produces a capital gain or loss. A token swap on a decentralized exchange fits this.
• Gas fees. Paying a network fee in crypto is itself a disposal, according to the IRS FAQs, although transaction costs can be added to basis or subtracted from proceeds.
• Rewards. Crypto received for services is income at its dollar value when received. Revenue Ruling 2023-14 says staking rewards are income when the holder gains control of them, and that applies to staking through an exchange too.

How are liquidity pools taxed?

There is no IRS answer yet. Congress's Joint Committee on Taxation (JCT) identified no present-law guidance on liquidity pools, wrapping or DeFi in its September 2026 description of the Digital Asset Tax Certainty Act (H.R. 10357).

The open question is whether depositing two tokens and receiving an LP token in return is a swap of property. If it is, adding and removing liquidity could each produce a gain or loss. Because the law is unsettled, detailed records of each deposit, withdrawal and fee, with dates and dollar values, matter more than usual.

Is lending crypto taxable?

Interest or yield received is generally income, as covered in is crypto interest taxable. The harder question is whether handing tokens to a lending protocol counts as disposing of them.

The JCT explains that a special rule for securities loans, Section 1058, lets lenders avoid tax on lending stock, but it covers only securities as legally defined, so many digital asset loans may fall outside it. Older arguments that loans are not sales are untested for crypto, and DeFi loan terms vary widely. H.R. 10357 would extend Section 1058 to traded digital assets for transfers after enactment. As of November 2026 it had not become law.

How does DeFi tax reporting work?

DeFi users get few forms. Congress repealed the rules that would have made DeFi platforms issue Form 1099-DA in April 2025, RSM reported, and the IRS says decentralized, non-custodial brokers are not covered. RSM noted that this removes a form but not the duty to report gains and losses.

Disposals go on Form 8949 and Schedule D, and reward income usually goes on Schedule 1. Every Form 1040 also asks a yes-or-no digital asset question. Tools that read wallet histories, described in how crypto tax software works, help gather the data.

Rules differ by country and change often. Check the tax authority or a qualified professional for your own situation.