Got gains from margin trading? Your tax office will want a cut. Learn all about how crypto margin trading is taxed in our guide.
Do you pay tax on crypto margin trading?
Yes. You'll pay tax on crypto margin trading. Although most tax offices are yet to release dedicated guidance on crypto margin trading taxes - there is generally plenty of existing guidance on margin trading taxes for traditional markets, as well as existing guidance on crypto tax. As always, you should speak to an experienced crypto accountant for specific advice on your financial circumstances and tax liability.
How is crypto margin trading taxed?
Generally speaking, profits from crypto margin trading are viewed as capital gains, and it's only at the point you close your position that you'll realize a gain or loss. Of course, that's not the only transaction involved, and there are losses to consider too - so let's cover them all in more detail.
Capital gains and losses from crypto margin trading
As we said above, it's only at the point you realize a gain or loss from crypto margin trading that you'll have a potentially taxable event.
Capital gains are generally going to be treated in the same manner as capital gains from spot trading or other investments. So generally speaking, the same short-term and long-term tax rates will apply, although there may be specific rules for specific products, for example, gains from crypto futures are treated slightly differently in the US.
As with losses from spot trading, you can generally offset your losses against any gains of a similar nature. So you can use any losses from crypto margin trading to reduce your overall tax liability in most countries.
It's also important to note that those trading as professionals may be taxed differently.
What about crypto margin trading fees?
Again, you should check the rules where you live but in most instances fees relating to crypto margin trading are deductible. So any fee paid to open your position can be considered when calculating your cost basis and subsequent capital gain or loss when you've closed the position. As well as this, margin interest fees may also be tax deductible depending on where you live and how you're viewed as a trader.
Are margin calls taxed?
No, like when you open a position, maintaining your position due to a margin call by adding more collateral is not a taxable event as you haven't disposed of your asset.
How is forced liquidation in margin trading taxed?
If your position is liquidated then this will generally be viewed as a disposal from a tax perspective, as though you had sold the asset, and you'll need to calculate any loss or gain.
Does Koinly support margin trading?
Yes. Koinly is a crypto tax tool that calculates your crypto taxes for you, including gains and losses from margin trades, as well as any margin interest fees and more.
All you need to do is connect the exchange you're using to Koinly and it'll do the rest.
As a quick breakdown, here’s a short summary of what Koinly does:
- Imports all your trades including margin trades and related fees
- Converts your transactions into your country’s currency at fair market value
- Deciphers which of your transactions are taxable and which are not
- Calculates your capital gains or losses, as well as fees that may be tax deductible like margin interest fees
- Helps you submit a clean and accurate report to your tax office