How to Report BlockFi Earnings on Your Taxes
BlockFi, a wealth management platform for cryptocurrencies, has quickly grown in popularity as investors have sought ways to earn yield or interest on their crypto holdings. With this rise in popularity, a lot of people have been asking: How do you report BlockFi interest on your taxes?
In this post, we look at the tax implications that come with your BlockFi account—whether you are trading, earning interest, or taking out loans. We also demonstrate how you can automate all of your BlockFi tax reporting by using cryptocurrency tax software like CryptoTrader.Tax.
Crypto Taxes - An Overview
If you’re not familiar with the general tax implications of cryptocurrencies, it’s best to start with our Ultimate Guide to Crypto Taxes. This guide discusses everything you need to know about cryptocurrency taxes.
At a high level, cryptocurrencies are classified as property by the IRS. When you sell, trade, or dispose of your crypto, you incur capital gains and losses that need to be reported on your taxes.
Additionally, when you earn cryptocurrencies, whether from interest accounts like BlockFi, mining, staking, or income from a job, that income is subject to income taxes at the fair market value of the cryptocurrencies at the time you earned them.
BlockFi Interest Accounts
Crypto that is earned as interest from your BlockFi interest account is a form taxable income.
The amount of income that you recognize is equal to the fair market value in USD of the interest at the time it was received.
Mitchell earned 0.05 BTC in interest rewards from his crypto holdings during the month of March. When Mitchell received this interest from BlockFi, 0.05 BTC was worth $200.
In this example, Mitchell recognizes $200 of interest income that he must report on his taxes.
If you used BlockFi to trade between cryptocurrencies or sell your cryptocurrencies, capital gains and losses rules also apply. The USD value of these capital gains and losses need to get reported on your taxes.
Faith purchases 1 BTC on BlockFi for $10,000. Two months later, she trades this BTC for 30 ETH, which at the time is worth $20,000.
In this example, Faith disposes of her 1 BTC by trading it for ETH. This action triggers a $10,000 capital gain (20,000 - 10,000).
This capital gain then gets reported on Form 8949 and included with Faith’s yearly tax return.
Taking out a loan from crypto-based collateral does not trigger a taxable event, and you do not realize any gains or losses in your crypto-based collateral.
Depending on what you do with your crypto loan, for example if you use it to buy and sell more cryptocurrencies, these transactions would be subject to associated capital gains and losses.
Crypto Tax Software - Automate Your Tax Reporting
CryptoTrader.Tax integrates directly with your BlockFi trading and interest accounts to enable seamless tax tracking and reporting.
You can import your BlockFi transaction history file directly into CryptoTrader.Tax—along with all of the other cryptocurrency exchanges and platforms you’ve used throughout the year.
Once this historical data is imported, you can generate your necessary crypto tax forms with the click of a button. No manual work is required!
Simply send these forms off to your accountant or import them directly into TurboTax to finish up your annual tax reporting.
Get Started For Free
You can create a CryptoTrader.Tax account and import all of your BlockFi transactions completely for free! Only pay when you actually want to generate your tax reports.
You can create your free account right here.