Trying to file taxes on your Balancer transactions?
DeFi taxes can be hard to navigate — even for experienced investors. Since most DeFi protocols don’t provide tax forms, investors often spend hours of time and effort finding the information they need to accurately report their taxes.
In this guide, we’ll break down everything you need to know about how Balancer transactions are taxed. We’ll also share a 3-step process that can help you calculate your Balancer taxes in minutes.
Balancer is a DeFi protocol that allows users to buy, sell, and trade cryptocurrencies. The protocol was founded in 2018 by Fernando Martinelli and Mike McDonald.
Unlike traditional exchanges, Balancer doesn’t rely on centralized market makers to facilitate trades. Instead, Balancer uses decentralized liquidity pools, where tokens are provided by users.
While exchanges like Uniswap limit their liquidity pools to 2 assets, Balancer’s liquidity pools can support up to 8 crypto-assets at a time. No matter how the price of each cryptocurrency fluctuates over time, Balancer’s smart contracts ensure that each asset continues to have an equal weight in the liquidity pool.
Before we jump into how you can file your Balancer taxes, let’s briefly review the basics of cryptocurrency taxation.
Cryptocurrency is subject to capital gains and ordinary income tax.
For more information, check out our guide to how cryptocurrency is taxed.
While the IRS hasn’t put out explicit guidance on how DeFi is taxed, we can reasonably assume the following based on previous guidance.
For more information, check out our guide to DeFi taxes.
Did you pay gas fees while using Balancer? Gas fees that are directly related to acquiring or disposing of cryptocurrency can reduce your capital gains tax.
For more information, check out our guide to how gas fees are taxed.
To file your taxes, you’ll need the following information.
At this time, most DeFi protocols don’t provide tax forms for users. As a result, it’s your responsibility to track this information for tax purposes.
Crypto tax software like CoinLedger can help. No matter how many Balancer transactions you have, you’ll be able to import your transactions and calculate your taxes with just a few clicks.
With CoinLedger, you can report your Balancer transactions on your tax return in just three simple steps.
1. Within the CoinLedger platform, select ‘Import’ and select the option ‘Ethereum Wallet’.
2. Copy and paste the wallet address that you used to conduct trades/provide liquidity to Balancer.
3. CoinLedger will automatically import transactions you conducted with your Ethereum wallet — including Balancer transactions!
And that’s it! Once you import your other cryptocurrency transactions, you’ll be able to generate a comprehensive tax report with the click of a button.
Want to get a head start on the tax season? With CoinLedger, filing your crypto taxes has never been easier.
With CoinLedger, you can automatically import transactions from hundreds of exchanges and blockchains. Get started today and see for yourself why more than 300,000 investors across the globe trust CoinLedger.