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How to Do Your Solana Taxes

How to Do Your Solana Taxes

Not sure how to file taxes on your Solana transactions? 

Whether you’re trading the native tokens, buying and selling NFTs on the blockchain, or lending and staking on decentralized protocols, trying to report your Solana taxes can be stressful. 

In this guide, we’ll break down everything you need to know about reporting your crypto taxes, no matter what type of transactions you’ve done on the Solana blockchain during the tax year. 

What is Solana? 

Solana got its start back in 2017, when founder Anatoly Yakovenko published a whitepaper about the blockchain. 

Yakovenko was a former Qualcomm engineer who believed that existing blockchains like Bitcoin and Ethereum took too long to reach consensus. To solve this problem, he envisioned a new timekeeping technique for blockchains called Proof of History. 

In 2020, the Solana blockchain launched its Mainnet Beta. By leveraging Proof of History, it promised higher transaction speeds and lower fees than the Bitcoin and Ethereum networks. 

Today, Solana is one of the world’s most popular cryptocurrencies. It’s one of the top 10 largest cryptocurrencies by market capitalization and is one of the most popular blockchains for DeFi and NFTs. 

Crypto taxes 101 

The Solana token, like other cryptocurrencies, is taxed as property. That means that it’s subject to both income and capital gains tax. 

Capital gains tax 

Any time you dispose of $SOL, you incur capital gains and losses depending on how the price has fluctuated since you originally received it. This includes: 

  • Selling SOL for fiat
  • Trading SOL for other cryptocurrencies
  • Paying in SOL to purchase goods and services 

Income tax 

Earning cryptocurrency through airdrops, staking, or wages is considered personal income and will be taxed accordingly. Earning staking rewards on the Solana blockchain would fall into this category. 

For more information, check out our complete guide to cryptocurrency taxes

How are Solana transaction fees taxed? 

If you are executing transactions on the Solana blockchain, you are required to pay transaction fees. In many instances, these fees can be added to your cost basis, which can reduce your capital gains in a disposal event. 

How are Solana NFTs taxed? 

Trading NFTs is considered a crypto-to-crypto transaction. Whether you’re buying an NFT or selling one, you will incur capital gains and capital losses depending on how the value of your assets has fluctuated since you originally received them.

 For more information, check out our guide to NFT taxes

Can I avoid Solana taxes?

There is no legal way to evade taxes on Solana or any other blockchain. 

In recent years, the IRS has taken steps to tackle cryptocurrency tax fraud. The agency has partnered with contractors like Chainanalysis that analyze on-chain transactions to identify tax cheats.

The 2021 American infrastructure bill will likely make tax avoidance even more difficult in the future. 

Why is it so difficult to report Solana taxes? 

If you’re using multiple wallets or interacting with multiple decentralized applications, tracking your taxes can become difficult. Investors often have trouble keeping a record of their cost basis across different crypto-assets, which they need to calculate capital gains.

If you find yourself in this situation, crypto tax software like CoinLedger can help. You can manually upload your transactions to easily report taxes on Solana and other crypto-assets when tax season rolls around. 

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