How to file your Tether (USDT) taxes with Koinly
Tether (USDT) is a multi-chain stablecoin, and the largest stablecoin by market capitalization with billions traded daily. USDT, despite being pegged to the USD and traded as dollars, is still considered a crypto asset, which means that investing in it may result in a tax liability. Koinly can help you calculate taxes for USDT as well as for 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 multichain tokens like USDT.
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 Tether transactions taxed?
Despite being pegged to the USD - because your USDT is a crypto asset and therefore a kind of property, you may have tax implications from your investments. The tax implications vary depending on where you live, so read our crypto tax guides for more information. But, generally speaking, two taxes may apply to your Tether transactions:
Capital Gains Tax: When you sell, swap, or spend USDT, 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 USDT - for example, through staking rewards - you may need to pay Income Tax based on the fair market value of your USDT in your fiat currency at the point you received them.
Can the IRS track USDT?
As one of the top three cryptocurrencies by market capitalization, you can bet the IRS is taking an interest in Tether. But how does the IRS track Tether and other cryptos?
Blockchains - excluding private blockchains like Monero - are a public ledger. That means anyone, including the IRS, can search and find transactions relating to a specific public address. All the IRS needs to do is be able to link your identity to a given wallet or transaction.
There are a couple of ways the IRS can do this. For starters, they’re using John Doe summons to compel centralized crypto exchanges to share customer data, potentially including details on any wallets you’ve transferred to using a centralized crypto exchange.
As well as this, to try and comply and avoid further IRS interest many centralized crypto exchanges issue what’s known as a 1099 form - a kind of 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 Tether and other crypto, here.
How to get Tether tax documents
Depending on where you live, you’ll generally need to report your gains, losses, and income from USDT investments in your annual tax return.
This starts by calculating your Tether gains and losses - even if they’re negligible - as well as the fair market value of any income from USDT in your fiat currency on the day you received it.
It’s time-consuming, which is why most opt to use a crypto and Tether tax calculator like Koinly. Koinly can calculate your gains, losses, and income for hundreds of thousands of coins and tokens - including Tether.
All you need to do is connect your blockchain to Koinly and it’ll do the rest. Here’s how.
How to import Tether transactions to Koinly automatically
To import your Tether transactions into Koinly, you’ll need to connect each blockchain you use to interact with Tether to Koinly. As Tether is a multi-chain token, this means you may need to connect to multiple blockchains in order to import your complete Tether transaction history, for example, Ethereum, Binance Smart Chain and Tron.
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 Tether 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
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
Remember, you’ll need to do this for every wallet you use to interact with USDT (and any other tokens!) in order to calculate your crypto taxes correctly. As USDT is multi-chain, you’ll need to add your public address to Koinly from each blockchain (and wallet!) in order to import your complete Tether transaction history.
It’s really helpful to name your wallets when you’re adding them to Koinly. This can help you find any transactions you believe have errors later on much more easily!
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 Tether?
Tether is a popular multi-chain stablecoin - a kind of crypto asset that is pegged to the value of the US dollar at a 1:1 ratio.
How does Tether work?
Tether is a collateralized stablecoin. That means tokens are backed at a 1:1 ratio by reserves, and you can exchange $1 for 1 USDT, and vice versa, at any point.
Where can I buy Tether?
Tether can be bought and sold on cryptocurrency exchanges such as Binance, Coinbase, and Kraken, as well as swapped for other tokens on decentralized exchanges.
What is the purpose of using Tether?
Stablecoins like Tether are a popular investment opportunity as they offer investment opportunities in the crypto market, theoretically without the risk of price volatility.
Is Tether safe?
Stablecoins are a popular investment as their price volatility is reduced. However, the stability of Tether has been subject to controversy and it has depegged before. Investors always should do their own research before investing and know the risks.
Is Tether a stablecoin?
Yes. Tether is a multi-chain stablecoin, pegged to the US dollar at a 1:1 ratio and collateralized by reserves.
Has Tether depegged before?
Yes. Tether has depegged and dipped below its 1:1 ratio before during turbulent market conditions, although it has then restabilized shortly after.
How is Tether different from other cryptocurrencies?
Tether is a collateralized stablecoin. This means it’s a cryptocurrency that is pegged to the value of another asset - in this instance, the US dollar. It’s pegged at a 1:1 ratio, so 1 USD = 1 USDT, and holds reserves to maintain this peg.
What is the total supply of Tether?
The total supply and circulating supply of USDT at the time of writing is 70.8 billion.
Is Tether regulated?
No, Tether is not regulated by any government agency despite its association with the US dollar. In fact, the Commodity Futures Trading Commission has previously fined Tether Holdings Limited for making untrue or misleading statements and omissions of material fact in connection with the U.S. dollar.
Can Tether be used for everyday purchases?
Yes. You can use Tether to pay for a range of goods, either via payment processors that accept Tether as a means of payment or by using a crypto debit card. But remember - spending Tether may result in a taxable transaction.
Is USDT 100% backed?
According to Tether's website, yes USDT is 100% backed meaning every USDT is backed by another asset. However, this claim has come under scrutiny from many crypto experts due to a lack of transparency around the kind of assets held. For example, Tether states while reserves are maintained at a 100% ratio, reserves may not be in cash, but instead in cash equivalents like government bonds.
What blockchain is USDT on?
USDT is a multi-chain token, available on several blockchains including Ethereum, Binance Smart Chain, Tron, and more.
Is Tether a good investment?
Tether is a popular cryptocurrency investment and one of the most widely adopted stablecoins. However, all cryptocurrencies come with risks and you should always DYOR before investing.
Where can I stake Tether?
You can stake Tether on centralized crypto exchanges like Binance Earn or stake your Tether through decentralized protocols like Compound Finance.
Is USDT better than BUSD, USDC, and other stablecoins?
Like USDT, both UDSC and BUSD are collateralized stablecoins, meaning the peg is maintained by 100% backed reserves. While USDT is the market leader, some investors prefer BUSD or USDC as they’re fiat-collateralized, instead of a mix of fiat and cash equivalent like USDT.
Do I have to pay taxes on USDT?
Yes. Although Tether is pegged to the value of a dollar, it’s still a crypto asset and therefore a property. This means it will generally be subject to Capital Gains Tax or Income Tax depending on your specific investments.
What tax forms do I need to file for Tether transactions?
This depends on where you live. For example, in the US, taxpayers need to report every single time they sold, swapped, or spent USDT 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.