How to file your Binance USD (BUSD) taxes with Koinly
Binance has announced plans to phase out its support for the BUSD stablecoin by February 2024.
How to do your Binance USD taxes with Koinly
Binance USD (BUSD) is a fiat-collateralized stablecoin, issued by crypto giants Binance and Paxos. BUSD is pegged at a 1:1 ratio with the US and was a top 10 cryptocurrency by market cap. Although your BUSD functions the same as a dollar - it’s still a crypto asset from a tax perspective and therefore you might have a surprise tax bill in store. Don’t worry, Koinly can help you calculate taxes for BUSD and thousands of other ERC-20 tokens. Here’s how.
Sign up to Koinly and choose your country and currency.
Connect with Koinly to import all your trades safely and securely - including ERC-20 tokens like BUSD.
Koinly identifies the cost basis of all your coins and tokens, as well as your taxable transactions.
Koinly calculates any capital gains, losses, and income from your taxable transactions.
Koinly generates your crypto tax report - ready to help you file with your tax office, or hand it over to your accountant.
How are BUSD transactions taxed?
It doesn’t matter that BUSD is a stablecoin from a tax perspective, it’s still a crypto asset and therefore Capital Gains Tax or Income Tax may apply. See our crypto tax guides for specific information about crypto tax where you live but, generally speaking, here’s when you may pay tax on BUSD:
Capital Gains Tax: When you sell, swap, or spend BUSD, you may need to pay Capital Gains Tax on any gain you made as a result - even if it’s minimal.
Income Tax: When you earn BUSD - for example, through Binance Earn - you may need to pay Income Tax based on the fair market value of your BUSDÂ in your fiat currency at the point you received them.
Can the IRS track BUSD?
BUSD is a top 10 cryptocurrency by market capitalization, so it’s highly likely the IRS has taken an interest. But can the IRS track BUSD?
Blockchains, other than private blockchains like XMR, are public ledgers. That means anyone, including the IRS and other tax offices, can search and find transactions relating to a specific public address. From here, all the IRS needs to do is link your identity to a particular wallet.
There are a couple of ways the IRS collects user data to track cryptocurrency transactions. One of the most common is to issue John Doe summons to centralized crypto exchanges to compel them to share customer data. This data potentially includes your personal details like your name and address, as well as details on any wallets you’ve transferred to using a centralized crypto exchange.
As well as this, many centralized crypto exchanges issue what’s known as a 1099 form - a form that reports income from sources other than your employer. Binance and Paxos issue BUSD, and both of them issue 1099 forms. You may receive a 1099 form if you’re earning over a certain amount in BUSD or another cryptocurrency, or if you’ve traded a certain volume of crypto. Whenever you get a 1099 form, the IRS gets an identical copy. You can learn more about how the IRS tracks crypto, here.
How to get BUSD tax documents
The exact steps involved in calculating and reporting your BUSD taxes will all depend on where you live and your tax office. Generally speaking, you’ll need to report any gains, losses, or income from BUSD investments as part of your annual tax return.
To do this, you need to identify each taxable transaction of BUSD - so this includes every single time you sold, swapped, or spent BUSD, as well as any time you earned BUSD. You’ll then need to calculate any gains or losses - even if they’re tiny - as well as the fair market value of any income from BUSD in your fiat currency on the day you received it.
For active investors, this takes hours, which is why most investors opt to use a crypto and BUSD tax calculator like Koinly. Koinly can calculate your gains, losses, and income for hundreds of thousands of coins and tokens - including BUSD.
All you need to do is connect your blockchain to Koinly and it’ll do the rest. Here’s how.
How to import Binance BUSD transactions to Koinly automatically
To import your BUSD transactions into Koinly, you’ll need to connect each Ethereum wallet you use to interact with BUSD to Koinly.
As well as this, if you’re using Binance-Peg BUSD on other blockchains like Binance Smart Chain, Avalanche, Polygon, Tron, or Optimism - you’ll need to connect these blockchains to Koinly as well.
This is really easy to do, you just need your public address from each blockchain - but remember, you’ll need to do this for each wallet you use to interact with BUSD in order for Koinly to correctly identify your cost basis, transfers, sales, swaps, and more.
You can find steps on how to connect a variety of popular wallets to Koinly on our integration pages, but here’s an example of how it generally works.
In your wallet
Open or log in to your wallet
Select the blockchain you’d like to connect to - for example, Ethereum or Binance Smart Chain
Copy your public address
On Koinly
Sign up or log in to your Koinly account and go to the wallets page
Search for and select the blockchain you’d like to connect to - for example, Ethereum or Binance Smart Chain
Give your wallet a name - for example - MetaMask or Trust Wallet
Paste your public address
Select import
Important
Remember, you’ll need to do this for every wallet you use to interact with BUSD (and any other tokens!) in order to calculate your crypto taxes correctly. As BUSD is available as a wrapped token on other blockchains, you’ll need to add your public address to Koinly from each blockchain (and wallet!) in order to import your complete Binance USD transaction history.
It’s really helpful to name your wallets when you’re adding them to Koinly. If you need to troubleshoot later on, it can help you identify and fix issues much faster!
You may also be able to upload your transaction history to Koinly as a CSV file instead of connecting using your public address if you prefer, but this depends on the wallet you’re using. You can search for your wallet on our integration pages to find out more about how to get a CSV file from your wallet.
Your frequently asked questions
What is BUSD?
Binance USD (BUSD) is a fiat-collateralized stablecoin, pegged to the US dollar at a 1:1 ratio and backed by fiat reserves, issued by Binance and Paxos. It is a top 10 cryptocurrency with a market capitalization of more than 10Â billion.
Where can I buy BUSD?
You can buy BUSD on centralized crypto exchanges like Binance, as well as swap other tokens for BUSD on a variety of decentralized crypto exchanges.
How does BUSD maintain its value?
BUSD is a fiat-collateralized stablecoin, meaning every BUSD issued is backed by $1. BUSD holds reserves in both cash and US treasuries.
Is BUSD safe?
Stablecoins like BUSD are a popular investment as their price volatility is reduced. However, BUSD has recently depegged due to confusion over regulatory issues in the US. Investors always should do their own research before investing and know the risks.
Is BUSD a stablecoin?
Yes. BUSD is a stablecoin, pegged to the US dollar at a 1:1 ratio and collateralized by reserves made up of cash and US treasuries.
Has BUSD ever lost its peg?
Yes, BUSD has struggled to maintain its peg recently after the SEC triggered a bank run by issuing a notice to Paxos alleging that BUSD was an unregistered security and the NYDFS ordered Paxos to stop minting new BUSD.
What blockchain is BUSD on?
BUSD is an ERC-20 token issued on the Ethereum blockchain, however, there are also wrapped versions available on other blockchains, like Binance Smart Chain.
What is the total supply of BUSD?
The total supply and circulating supply of BUSD at the time of writing is more than 10 billion, but this number is decreasing in light of regulatory notices from the SEC and NYDFS.
Is BUSD 100% backed?
Yes, Paxos state BUSD is 100% backed by reserves, either in cash or US treasury bills, and release BUSD monthly reserves holding reports to aid transparency.
Is BUSD a good investment?
BUSD is currently a top 10 cryptocurrency and widely adopted stablecoin… however, in light of recent regulatory issues, it’s unclear what the future may hold for BUSD. Investors should do their research before investing to ensure they understand the risks involved.
Where can I stake BUSD?
You can stake BUSD through centralized crypto exchanges like Binance Earn or stake your BUSD through decentralized protocols.
Is BUSD better than USDT, USDC, and other stablecoins?
Many investors flocked to invest in BUSD in light of the lack of transparency from USDT and in the wake of the collapse of UST, as BUSD benefits from the Binance branding and is issued by two reputable crypto companies. However, in light of the recent regulatory issues with BUSD, many investors have been switching to USDT, USDC, and other stablecoins that aren’t under fire from the SEC.
Do I have to pay taxes on BUSD?
Yes. Despite being pegged to the dollar, BUSD is a crypto asset and taxable as a crypto asset, This means you may need to pay Capital Gains Tax on any gain when you sell, swap, or spend BUSD, as well as Income Tax any time you’re seen to be earning BUSD - for example, from staking rewards.
What tax forms do I need to file for BUSD transactions?
This entirely depends on where you live. For example, US investors should report every single transaction where they sold, swapped, or spent BUSD to the IRS in Form 8949 and Schedule D.
Are stablecoins taxable?
Yes, stablecoins are taxable in the same way that other cryptocurrencies are. Any gains, however minimal, from selling, swapping, or spending stablecoins are generally subject to Capital Gains Tax.
Are there any tax advantages to using stablecoins?
No, stablecoins do not offer any specific tax advantages compared to other cryptocurrencies. This said, using stablecoins can help minimize any potential taxable gain from spending crypto as your cost basis will theoretically remain the same from the point you purchase to the point you spend it.
