Understand lending transactions

Crypto lending allows individuals to lend their crypto to borrowers for a return. Transactions can be categorized as:

• Liquid lending: Deposits or withdrawals in exchange for a tradable, liquid token.
• Illiquid lending: Deposited assets are locked and cannot be traded until withdrawn.

Lending categories

CoinTracker has two categories, Lending Deposit and Lending Withdrawal, to help customers accurately record these transactions. These can be classified as:

• Lending deposit: A trade (for liquid lending) or a send (for illiquid lending).
• Lending withdrawal: A trade (for liquid lending) or a receive (for illiquid lending).

Set liquid lending as non-taxable

You can choose to treat liquid lending as non-taxable (lending deposits and withdrawals) in your CoinTracker tax settings. We recommend consulting a tax professional before changing your tax settings, as tax implications can be complex and vary by country and other factors.

When treated as non-taxable:

• The cost basis transfers (plus the fee) from the outgoing token (lending deposit) to the incoming token (lending withdrawal).

How to update your tax settings

1. Navigate to the Settings page.
2. Select the Tax tab.
3. Toggle on Treat liquid lending as non-taxable.
4. Select a start date.
5. Select an end date (optional), then select Next.
6. Review your selection and select Confirm & save to finish.

To turn off this setting, toggle it off.

Example: Liquid lending treated as non-taxable

• Suppose you purchased ETH on 12/8/2022 and did two lending deposits on 6/8/2022. 
• The acquired date for aArbWETH (the liquid lending token) stays 12/8/2022 — the date you purchased the ETH. 
• If you later withdraw the lending position on 12/8/2023 and sell the ETH the same day, the acquired date for the ETH still shows as 12/8/2022.

Illiquid lending transactions

Illiquid lending deposit transactions appear as send (outgoing) transactions. 

Missing balance error for lending transactions

CoinTracker flags a missing balance error when a lending withdrawal is tagged without a corresponding lending deposit. To resolve this:

• Refer to our guide on resolving missing lending balance errors for step-by-step instructions.
• You'll need to either locate the corresponding lending deposit or split interest income from the principal amount.

Transactions without a matched lending deposit will have a cost basis of 0. 

Disclaimer: CoinTracker is provided for informational purposes and is not intended as tax, audit, accounting, investment, financial, or legal advice. For financial, tax, or legal advice, please consult your own professional. See our full disclaimer.