How to file your Decentraland (MANA) taxes with Koinly

Decentraland is a virtual world built on the Ethereum blockchain and powered by MANA tokens, the native currency of this metaverse. Investors can buy, sell, and swap MANA tokens, as well as earn MANA tokens by selling or renting LAND, and by creating paid experiences in-game. But while the metaverse might be virtual, metaverse tax implications are very real. Whatever your MANA transactions, Koinly can help you calculate your taxes for MANA and thousands of other ERC-20 tokens and NFTs.

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 MANA

3. Koinly identifies the cost basis of your tokens and coins, 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 MANA tokens taxed?

Unsurprisingly, tax offices haven't released any guidance yet on the potential tax implications of metaverses like Decentraland. But that doesn't mean your MANA won't be taxed. You'll need to look at the existing guidance from your tax office (you can find this in our crypto tax guides) and apply it to your MANA transactions. As an overview, generally speaking, two taxes may apply to your MANA transactions:

• Capital Gains Tax:  If you've sold, swapped, or spent MANA tokens and made a gain, you'll usually pay Capital Gains Tax on that gain.

• Income Tax: When you earn new MANA tokens, for example, by earning MANA through renting land, this may be viewed as additional income and subject to Income Tax based on the fair market value of your MANA tokens in your fiat currency at the time you received them.

As well as this, if you're selling or trading NFTs in Decentraland - these also have tax implications. NFTs are generally viewed the same way as any other crypto asset, so selling or trading NFTs is a disposal of an asset, and any gain is subject to Capital Gains Tax. This said, if you're creating NFT assets and selling them for MANA regularly - like an artist selling paintings - this may potentially be viewed as income instead and subject to Income Tax.

Can the IRS track MANA?

The question on everyone's mind... can the IRS track crypto? And would they be interested in MANA tokens if they could? Let's break it down.

MANA is an ERC-20 token on the Ethereum blockchain. Ethereum, like most other blockchains, is a public ledger. That means anyone, including the IRS, can search for a given address to view the transactions made. So if the IRS can link your identity to a given wallet or transaction - then they may know about your investments.

As well as this, if you've traded or staked MANA using a centralized exchange, many of these exchanges issue 1099 forms to users with specific earnings - and whenever you receive a 1099 form, so does the IRS.

So the next question is, how interested is the IRS in the metaverse? While the IRS hasn't released any specific guidance on the tax implications of Decentraland and other metaverses, that doesn't mean they aren't paying attention. Especially when LAND in the metaverse was being sold for millions, like when the Metaverse Group purchased a LAND plot in Decentraland for $2.4 million, you can bet the IRS started taking an interest.

To avoid an unwelcome audit or crypto tax penalties, you should report your gains and income from crypto investments - including MANA - accurately.

How to get MANA tax documents

Most tax offices want you to report your gains, losses, and income from crypto investments, including MANA, in your annual tax return.

So you'll first need to calculate your gains, losses, and income from MANA, which starts with identifying each taxable transaction and the kind of tax that applies. Then you'll calculate a capital gain or loss for each disposal of MANA or the fair market value in your fiat currency for any MANA tokens considered additional income.

You have to do this not just for MANA, but for every crypto you've invested in - and it's time-consuming. This is why most investors use a crypto tax calculator like Koinly to save themselves hours of spreadsheets and manual calculations. Koinly can calculate your gains, losses, and income for more than 450,000 ERC-20 tokens - including MANA. You just need to connect Ethereum to Koinly, here's how.

How to import MANA transactions to Koinly automatically

To import your MANA 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 Ethereum wallet you use to interact with MANA in order for Koinly to correctly identify your cost basis, transfers, sales, swaps, and more. If you're interacting with NFTs in Decentraland as well, Koinly also supports all ERC-721 tokens too, so your LAND NFTs are supported too - you just need to import your transactions the same way you would your MANA transactions.

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 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 Ethereum

3. Give your wallet a name

4. Paste your public address