How to file your USDS (DAI) taxes with Koinly

USDC, formerly Dai (DAI), is an ERC-20 token on the Ethereum blockchain and a decentralized stablecoin, pegged at a 1:1 ratio with the US dollar and issued by Sky, formerly MakerDAO. Although for all intents and purposes, you can use your USDS as you would a dollar, it’s still a crypto asset - so you might have a surprise tax bill in store. Don’t worry, Koinly can help you calculate taxes for USDS and more than 400,000 other ERC-20 tokens. Here’s how. 

  1. Sign up to Koinly and choose your country and currency.

  2. Connect Ethereum with Koinly to import all your trades safely and securely - including ERC-20 tokens like USDS.

  3. Koinly identifies the cost basis of all your coins and tokens, as well as your taxable transactions.

  4. Koinly calculates any capital gains, losses, and income from your taxable transactions.

  5. Koinly generates your crypto tax report - ready to help you file with your tax office, or hand it over to your accountant.

How are USDS transactions taxed?

Stablecoins are treated exactly the same as any other crypto asset from a tax perspective. How your USDS will be taxed depends on where you live and your country’s crypto tax rules. You can read our crypto tax guides for specific information about crypto tax where you live. Generally speaking, here’s when you may pay tax on USDS:

  • Capital Gains Tax:  Selling, swapping, or spending USDS is a disposal of an asset and any gain may be subject to Capital Gains Tax.

  • Income Tax: Earning USDS - for example through USDS staking rewards - may be viewed as additional income and subject to Income Tax upon receipt.

Can the IRS track USDS?

USDS is a top 20 cryptocurrency by market capitalization, so it’s likely the IRS has taken an interest in ensuring taxpayers are correctly reporting any investments. But can the IRS track USDS?

Blockchains, including the Ethereum blockchain USDS exists on, are public ledgers. That means anyone can search and find transactions relating to a specific address - including the IRS. It all comes down to whether the IRS can link your identity to a particular address.

Although crypto is popular with some investors due to the anonymity involved, the reality as crypto has progressed is that for most investors crypto is pseudonymous. The IRS has dedicated agents collecting user data through a variety of means.

One of the most common is to issue John Doe summons to centralized crypto exchanges to compel them to share customer data - as has been the case with Coinbase, Kraken, and others. 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. You may receive a 1099 form if you’re earning over a certain amount in USDS or another cryptocurrency, for example, if you’re earning USDS by staking on Binance. 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 USDS tax documents

How to calculate and file your USDS taxes depends on where you live, but generally speaking, you’ll report any gains, losses, or income from USDS investments in your annual tax return.

You’ll need to start by identifying each taxable transaction of USDS - including every time you sold, swapped, spent, or earned USDS. You’ll then need to calculate any gains or losses from these transactions, as well as the fair market value of any income from USDS in your fiat currency on the day you received it.

For most investors, this can take hours of calculations and spreadsheets, which is why most investors opt to use a crypto tax calculator like Koinly. Koinly can calculate your gains, losses, and income for more than 400,000 ERC-20 tokens, including USDS.

All you need to do is connect Ethereum to Koinly and it’ll do the rest. Here’s how.

How to import USDS transactions to Koinly automatically

To import your USDS transactions into Koinly, you’ll need to connect each Ethereum wallet you use to interact with USDS to Koinly. (If you were using Binance-Pegged Dai on other blockchains like Binance Smart Chain or DAI.e on Avalanche, you’ll need to connect these blockchains separately 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 USDS 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

  1. Open or log in to your wallet

  2. Select the blockchain you’d like to connect to - for example, Ethereum

  3. Copy your public address

On Koinly

  1. Sign up or log in to your Koinly account and go to the wallets page

  2. Search for and select the blockchain you’d like to connect to - for example, Ethereum

  3. Give your wallet a name - for example - MetaMask or MyEtherWallet

  4. Paste your public address

  5. Select import

Important

  1. Remember, you’ll need to do this for every wallet you use to interact with Dai (and any other tokens!) in order to calculate your crypto taxes correctly. As Dai was available as a pegged 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 transaction history.

  2. 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!

  3. 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 USDS?
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What is the total supply of USDS?
Is USDS 100% backed?
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Is USDS better than USDT, USDC, and other stablecoins?
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