How to file your Pax Dollar (USDP) taxes with Koinly

Pax Dollar (USDP) is a fully collateralized stablecoin, pegged at a 1:1 ratio with the US dollar, issued on the Ethereum blockchain by Paxos, a New York-based fintech company. But despite being able to use your USDP in the same way you'd use dollars, the tax implications are very different as Pax Dollars are a crypto asset. Don't worry though, Koinly can help you calculate taxes for USDP and thousands of 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 USDP

  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 Pax Dollars taxed?

Although your Pax Dollars work like a tokenized dollar, USDP is a crypto asset, which means from a tax perspective it's treated very differently. 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 USDP transactions:

  • Capital Gains Tax:  When you sell, swap, or spend USDP, you may need to pay Capital Gains Tax on any gain you made as a result.

  • Income Tax: When you earn new USDP tokens - for example, through staking rewards - you may need to pay Income Tax based on the fair market value of your USDP in your fiat currency at the point you received your tokens.

Can the IRS track USDP?

Most blockchains, excluding outliers like Monero, are public ledgers. This means anyone, the IRS included, can search and find transactions relating to a specific wallet. After this, all the IRS needs to do is be able to link your identity to a given wallet or transaction.

The IRS has a couple of methods to collect user data to do this. One of the more aggressive methods is using John Doe summons to compel centralized crypto exchanges to share customer data, potentially including details on any wallets you’ve transferred to or from using a centralized crypto exchange.

Another common method to collect user data is through 1099 forms - a kind of form that reports income from sources other than your employer. Many centralized crypto exchanges issue 1099 forms to users earning or trading over a certain amount in crypto and whenever you get a 1099 form, the IRS gets an identical copy.

Learn more about how the IRS tracks crypto.

How to get Pax Dollar tax documents

How to report your crypto taxes depends on where you live, but generally speaking, your tax office requires you to report your gains, losses, and income from USDP and other investments in your annual tax return.

To do this, you need to know the figures you'll be reporting. So you'll need to calculate your gains and losses from USDP - even if they’re negligible - as well as the fair market value of any income from USDP in your fiat currency on the day you received it. It's worth noting that even though gains and losses from stablecoins may be negligible, some tax offices - like the IRS - require taxpayers to report every single disposal of crypto, regardless of the gain or loss realized.

It's time-consuming, which is why most investors opt to use a crypto and USDP tax calculator like Koinly. Koinly can calculate your gains, losses, and income for hundreds of thousands of coins and tokens - including USDP.

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

How to import Pax Dollar transactions to Koinly automatically

To import your USDP transactions into Koinly, you’ll need to connect each Ethereum wallet you use to Koinly.

This is really easy to do, you just need your public address - but remember, you’ll need to do this for each wallet you use to interact with USSP in order for Koinly to correctly identify your cost basis, transfers, sales, swaps, and more. As well as this, if you're transacting with USDP on centralized exchanges, you'll need to connect these to Koinly as well.

You can find steps on how to connect a variety of popular wallets and exchanges 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 - in this 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 - in this example, Ethereum

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

  4. Paste your public address

  5. Select import


  1. Remember, you’ll need to do this for every wallet you use to interact with USDP (and any other tokens!) in order to calculate your crypto taxes correctly.

  2. It’s really helpful to name your wallets when you’re adding them to Koinly. You'll be able to find transactions much more easily later on.

  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 Pax Dollar?
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