How to file your USD Coin (USDC) taxes with Koinly
USD Coin (USDC) is a multi-chain, fiat-collateralized stablecoin, pegged at a 1:1 ratio with the US dollar. It's one of the most popular stablecoins, with a market cap of more than 42 billion, and billions are traded daily. Despite being pegged to the dollar, USDC is a crypto asset and therefore you might have a surprise tax bill in store. Don’t worry, Koinly can help you calculate taxes for USDC and thousands of other tokens, across multiple blockchains. Here’s how.
Sign up to Koinly and choose your country and currency.
Connect your blockchain(s) with Koinly to import all your trades safely and securely - including multi-chain tokens like USDC.
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 UDSC transactions taxed?
From a tax perspective, it doesn’t matter that UDSC effectively works like a dollar - it’s still a crypto asset and therefore a kind of property, which means a couple of taxes may apply. Check out our crypto tax guides for specific information about crypto tax where you live but, generally speaking, two taxes may apply to your USDC transactions:
Capital Gains Tax: When you sell, swap, or spend USDC, 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 USDC - for example, through staking rewards - you may need to pay Income Tax based on the fair market value of your USDC in your fiat currency at the point you received them.
Can the IRS track USDC?
As a top 10 cryptocurrency by market capitalization, it’s inevitable that the IRS is taking an interest in USD Coin. But how does the IRS track USDC and other cryptocurrencies?
Blockchains, other than private blockchains like Monero, are public ledgers. That means anyone, including the IRS and other tax offices, can search and find transactions relating to a specific public address.
All the IRS then needs to do is link your identity to a particular wallet.
There are a couple of ways the IRS can do this. One of the most common, and aggressive, is to issue John Doe summons to centralized crypto exchanges to compel them to share customer data, potentially including your verification 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. You may receive a 1099 form if you’re earning over a certain amount in crypto, 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 USDC and other crypto, here.
How to get USDC tax documents
The precise steps to calculate and report your USDC taxes depend on where you live and your tax office. But generally speaking, you’ll need to report any gains, losses, or income from USDC investments as part of your annual tax return.
This starts by calculating your USDC gains and losses - even if they’re minuscule - as well as the fair market value of any income from USDC in your fiat currency on the day you received it.
It can be very time-consuming, which is why most investors opt to use a crypto and USDC tax calculator like Koinly. Koinly can calculate your gains, losses, and income for hundreds of thousands of coins and tokens - including USD Coin.
All you need to do is connect your blockchain to Koinly and it’ll do the rest. Here’s how.
How to import USD Coin transactions to Koinly automatically
To import your USD Coin transactions into Koinly, you’ll need to connect each blockchain you use to interact with USDC to Koinly.
As USDC is a multi-chain token, this means you may need to connect to multiple blockchains in order to import your complete USD Coin transaction history, for example, Ethereum, Solana, and Avalanche.
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 USD Coin 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 Solana
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 Solana
Give your wallet a name - for example - MetaMask or Phantom
Paste your public address
Select import
Important
Remember, you’ll need to do this for every wallet you use to interact with USDC (and any other tokens!) in order to calculate your crypto taxes correctly. As USDC is multi-chain, you’ll need to add your public address to Koinly from each blockchain (and wallet!) in order to import your complete USD Coin 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 USDC?
USD Coin (USDC) is a multi-chain, fiat-collateralized stablecoin that is pegged to the US dollar at a 1:1 ratio and backed by fiat reserves. It is a top 10 cryptocurrency with a market capitalization of more than $40 billion.
Where can I buy USDC?
You can buy USDC on centralized crypto exchanges including Coinbase, Binance, and Kraken, as well as swap other tokens for USDC on a variety of decentralized crypto exchanges.
How does USDC maintain its value?
USDC is a fiat-collateralized stablecoin. This means it's 100% backed by cash, so for every $1 of USDC in circulation, Circle holds $1 in reserve with regulated financial institutions.
Is USDC safe?
Stablecoins are a popular investment as their price volatility is reduced. However, USDC has briefly depegged before in very turbulent market conditions. Investors always should do their own research before investing and know the risks.
Can USDC be used for everyday purchases?
Yes, you can use USDC as a means of payment either by using payment processors that accept USDC or by using a crypto debit card. But remember - spending USDC may result in a taxable transaction.
Is USDC a stablecoin?
Yes. USDC is a multi-chain stablecoin, pegged to the US dollar at a 1:1 ratio and collateralized by fiat reserves.
Has UDSC ever lost its peg?
Yes, during very turbulent market conditions in May 2022 - following the collapse of Terra Luna’s stablecoin UST - USDC and many other stablecoins momentarily depegged and restabilized shortly after. More recently, USDC depegged during a bank run after it was revealed that around $3.3 billion of reserves were held with Silicon Valley Bank, which collapsed before intervention from central banks.
What is the total supply of USDC?
The total supply and circulating supply of USDC at the time of writing is more than 40 billion.
Is USDC 100% backed?
Yes. USDC is a fully reserved stablecoin, meaning for every 1 USDC, there is $1 backed by cash or short-dated US treasuries.
What blockchain is USDC on?
USDC is a multi-chain token, available on several blockchains including Ethereum, Solana, and Avalanche.
Is USD Coin a good investment?
USD Coin is a popular investment. It’s a top 10 cryptocurrency, making it one of the most widely adopted stablecoins. However, as with all cryptocurrencies, you should do your research before investing to ensure you understand the risks involved.
Where can I stake USDC?
You can stake USDC through centralized crypto exchanges like Coinbase Earn or stake your USDC through decentralized protocols.
Is USDC better than USDT, BUSD, and other stablecoins?
USDC is similar to USDT and BUSD in that it's a collateralized stablecoin. Some investors prefer USDC and BUSD as they’re both fiat collateralized and haven’t faced the same controversies USDT has. For BUSD specifically, some investors may prefer this stablecoin as it is more widely adopted.
Do I have to pay taxes on USDC?
Yes. You may have to pay taxes on your USD Coin investments. Although USDC is pegged to the value of a dollar, it’s still a crypto asset and therefore may be subject to Capital Gains Tax or Income Tax depending on your specific investments.
What tax forms do I need to file for USDC transactions?
This depends on where you live. For example, in the US, taxpayers need to report every single time they sold, swapped, or spent USDC throughout the financial year - and any gain or loss no matter how minute - in Form 8949 and Schedule D, as well as any crypto income in Form 1040 or Schedule C.
Are stablecoins taxable?
Yes, stablecoins are taxable in the same way that other cryptocurrencies are. Any gains from selling, swapping, or spending stablecoins are generally subject to Capital Gains Tax.
Are there any tax advantages to using stablecoins?
Stablecoins do not offer any specific tax advantages compared to other cryptocurrencies. However, 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.
