How are crypto loans taxed?

This is a guest post from our Authorized Partner at CoinLedger.

This post is for informational purposes only and is not a substitute for professional legal and tax advice.


Taking out a cryptocurrency loan (a loan secured by crypto assets like Bitcoin and Ether) can help you save thousands of dollars on your tax return.

While selling your cryptocurrency is a taxable event, taking out a crypto-backed loan is typically tax-free.

In this guide, we’ll break down everything you need to know about how crypto loans are taxed. By the time you’re finished reading, you’ll understand why taking out a crypto-backed loan can be a fantastic strategy for tax savings.

The basics of cryptocurrency taxation


Before we jump into the tax implications of cryptocurrency loans, let’s briefly review the basics of how crypto is taxed.

In the United States, cryptocurrency is subject to capital gains and ordinary income tax.

Capital gains tax: When you dispose of crypto, you’ll incur a capital gain or loss depending on how the price of your crypto has changed since you originally acquired it. Examples of disposals include selling your crypto, crypto-to-crypto trades, and using your crypto to make a purchase.

Ordinary income tax: When you earn cryptocurrency, you’ll recognize ordinary income based on the fair market value of your crypto at the time of receipt. Examples of earning cryptocurrency include staking rewards, mining rewards, airdrop rewards and receiving crypto as part or all of your paycheck.

Looking to estimate your crypto tax bill? Check out CoinLedger’s free crypto tax calculator.

What are the tax advantages of cryptocurrency loans?


Often, investors in need of fiat currency will sell off some of their existing crypto holdings. However, it’s important to note that “disposing” of your cryptocurrency has tax implications.

As previously mentioned, if you sell or trade your crypto assets, you’ll incur a capital gain or loss depending on how the value of your assets have changed since you purchased or acquired them.

  1. Charlie buys $1,000 of Bitcoin.
  2. Years later, Charlie sells his BTC for $10,000.
  3. Charlie incurs $9,000 of capital gain.
Capital Gains on Bitcoin SALT

How crypto loans can help you save money…

Unlike disposals, loans from centralized entities like SALT Lending are considered non-taxable because rather than spending your Bitcoin or other crypto assets, you’re using them as collateral to secure a cash or stablecoin loan. It’s similar to getting a loan against your car, house, or 401K in that you’re borrowing against assets you already own

Plus, if you’re long on crypto, meaning you believe the value of your assets will appreciate over time, a crypto-backed loan is an excellent way to get value out of your crypto assets right now without having to sell them or lose out on potential gains. By collateralizing your crypto with SALT, you can get cash in 48 hours or less and get your assets back as soon as you’ve paid off your loan in full.

How are DeFi loans taxed?

Unfortunately, many of the tax advantages of crypto loans don’t apply to the DeFi space.

Many DeFi lenders use crypto-to-crypto swaps to facilitate loans. In the past, the IRS has classified these types of transactions as disposal events subject to capital gains tax. As a result, it’s reasonable to assume that taking out a DeFi loan will be considered taxable in some situations.

In addition, DeFi lenders often automatically liquidate your holdings if their value falls below a certain threshold. Even if you don’t receive the proceeds of the liquidation, you’ll still be subject to capital gains tax.

Can I deduct interest payments from my taxes?


The interest payments on your cryptocurrency loans may be tax deductible in some scenarios.

Personal Loans: Non-Deductible

When you take out loans for personal reasons — such as for groceries, car payments, or tuition — your interest payments are considered non-deductible.

Investment Loans: Deductible

Loans taken out for investment purposes can be tax-deductible. If you took out a loan and re-allocated your funds to other investments, you can deduct your interest payments up to your net investment income for the year. This includes your total income from investments including capital gains from stocks and crypto, dividends, and interest.

Business Loans: Deductible

If you take out a loan as a business entity, you can deduct the cost of interest payments as a business expense.

Types of crypto loans with deductible interest

How are liquidations taxed?

SALT Lending takes steps to ensure that its customers’ funds are protected from total liquidation even in the case of a severe market downturn. If the value of your cryptocurrency begins to collapse, SALT Stabilization will convert your entire collateral portfolio to stablecoin to protect the value of your holdings.

It’s important to remember that converting cryptocurrency to stablecoin is considered a crypto-to-crypto trade subject to capital gains tax based on how the price of your collateral has changed since you originally received it.

In conclusion


While cryptocurrency disposals can lead to an expensive tax bill, crypto-backed loans are tax-free. That’s part of the reason thousands of investors use SALT Lending to take out loans against their Bitcoin, Ether, Litecoin, Bitcoin Cash , and other cryptocurrencies.

Take the Guesswork Out Of Crypto Taxes


Cryptocurrency tax reporting is a challenge for investors all over the world. By taking the right steps to track your transactions and legally reduce your tax liability, you can save yourself thousands of dollars as well as hours of stress during the tax season.

Whether it’s tracking your capital gains from buys, sells, or NFT mints, CoinLedger makes the process of doing your crypto taxes simple. Visit CoinLedger.io to learn more about how you can manage your crypto taxes in one place, and even import your tax filing information into TurboTax and other leading tax software platforms.

Sign up now for a free preview of your capital gains and losses!

For a limited time only, any SALT Lending customer can get 20% off of their next CoinLedger tax report with the discount code SALTLEND.

We’re excited to announce a potential acquisition by Bnk To The Future

We are excited to share a recent announcement in connection with our strategic partner Bnk To The Future (“BF”). We are exploring a potential acquisition and want you to have the background. BF has entered into a letter of intent to acquire SALT, contingent upon signing definitive agreements and regulatory approval.

This potential union will combine SALT, the world's first crypto lending platform, with BF, the world’s first Bitcoin and crypto securities business. Moving forward with this acquisition provides an opportunity to enhance our suite of products and advance our mission to preserve and grow your crypto wealth. 

What this means for you & your loan:

We want to assure you that there will be no changes to your loan as a result of this announcement. Read the full press release here.

To keep up to date, follow us on Twitter where we will post links for an upcoming shared Twitter Spaces and YouTube Live session with Bnk To The Future.

Please feel free to reach out to our loan support team with any questions you may have at loansupport at saltlending.com.

Update regarding our supported collateral types

Effective May 25, 2021, we will no longer accept Dash and Doge as collateral for new crypto-backed loans, nor will we support future deposits of these collateral types, but for those who already have Doge and Dash on our platform, we will continue to support and monitor your collateral. Withdrawals will continue to be available as usual for anyone who currently has Doge or Dash on our platform.

We are constantly evaluating our current collateral types and considering new ones based on market conditions and other parameters. Given Doge and Dash do not meet our current collateral requirements, it is necessary for us to remove them from the platform at this time. While we are sad to say goodbye, it doesn’t mean it’s goodbye forever. And who knows? Between Elon’s tweets and Coinbase’s decision to list Doge, maybe one of these collateral types will be back before you know it. Only time (and market conditions) will tell.

In the meantime, we continue to support many beloved cryptocurrencies as collateral for crypto-backed loans including BTC, ETH, LTC, BCH, PAX, PAXG, USDC, TUSD and SALT.

Want to be kept in the loop regarding announcements and products releases?

Update: XRP and your SALT account

In light of the uncertainty created by the recent SEC complaint involving Ripple/XRP, we are pausing support for all new XRP deposits on our platform.

Withdrawals of XRP will still be enabled for all users.

If you have any questions about your loan secured by XRP, reply to this email or contact [email protected]

How to protect your crypto-backed loan during global uncertainty

We at SALT want to take a moment to address the market volatility and global uncertainty stemming from COVID-19. We understand this level of uncertainty can be stressful and want to reaffirm that we’re taking the necessary steps to keep our employees and your assets safe.

Even as SALT employees have been asked to work from home for the foreseeable future, our support team will remain available 24/7. We’ve implemented our contingency plan for instances like this to ensure there will be no lapses in our customer service.

While we cannot predict what the market will do, we want to ensure you’re aware of the actions you can take NOW to protect your loan:

Taking any of the above steps will help protect your loan against market volatility. However, in the event of a severe market downturn like the one that took place on March 12, 2020, we want you to know your options for quickly restoring the health of your loan. Our blog post on what to expect when your collateral is on the decline offers additional details on how to manage your loan during a market downturn.*

Should you run into any issues please contact [email protected] or [email protected] and one of our team members will assist you. We’re here for you and happy to help.

And remember, in the midst of this global pandemic, your own health and safety should be your top priority. Here are some tips from the Centers for Disease Control and Prevention (CDC) on:

  1. How to prevent: https://www.cdc.gov/coronavirus/2019-ncov/about/prevention.html
  2. What to do if you feel sick: https://www.cdc.gov/coronavirus/2019-ncov/about/steps-When-sick.html
  3. Prepare yourself: https://www.cdc.gov/coronavirus/2019-ncov/protect/prepare.html

*This content is meant to educate and inform but should not be taken as financial or investment advice. Trading and investing in cryptocurrencies (also called digital or virtual currencies, cryptoassets, altcoins and so on) involves substantial risk of loss and is not suitable for every investor.

Uphold and SALT Announce Platform Integration to Seamlessly Connect 1.65M Uphold Users to SALT’s Crypto-Backed Loans

We’re excited to announce our partnership with Uphold — the leading digital money platform democratizing access to investments and payments using blockchain technology — to provide Uphold users with seamless cash or stablecoin loans using cryptocurrencies as collateral. Uphold users can now secure loans through SALT in as little as 24-hours against their holdings in Bitcoin, Ether, Litecoin, Bitcoin Cash, Dash, and as of today, XRP. The integration of the two platforms provides enhanced access to liquidity, enabling users to unlock additional value in their holdings.

In addition to bringing leading credit solutions to Uphold users, we’ve integrated Uphold wallets into our platform, allowing the company’s large and rapidly growing user base to access Uphold’s products through their dashboard. The integration streamlines the lending experience for shared users through seamless collateral transfers and loan proceed payouts.

“SALT has given its users the flexibility to access loans using their cryptocurrency holdings. Our integration with the SALT platform allows us to grow our service offering and provides another real-world use case for Uphold members,” said Robin O’Connell, Chief Revenue Officer, Uphold.

With a crypto-backed loan from SALT, Uphold users can unlock liquidity from their crypto assets without having to sell them. Unlike traditional financial institutions, we allow customers to use their crypto assets as collateral to secure a cash (USD) or stablecoin loan in as little as 24 hours, providing them with the opportunity to reach their personal financial goals including but not limited to funding a large purchase, consolidating debt, or accessing working capital to scale their business.

When applying for a loan through SALT, Uphold users can customize their loan by choosing their preferred loan type, loan amount, duration, and Loan-to-Value (LTV) ratio with options ranging from 30%-70%. There are no credit or income checks required and no origination or prepayment fees. With a crypto-backed loan from SALT, Uphold users can keep their crypto and get cash.

“Uphold has built an impressive platform that provides a seamless on-ramp into the digital economy and a simple method to transact across diverse asset classes. We’re excited to bring our leading crypto-credit products to Uphold’s global customer base and enhance our borrower experience through a direct integration with Uphold wallets on our platform,” added Jarrett Abraham, Director of Corporate Development, SALT. “Together, we’ll provide ultimate flexibility for crypto holders who need access to liquidity across a range of crypto assets and fiat currencies. This is an exciting strategic partnership for us that helps further our mission to accelerate the world’s ability to embrace crypto assets and participate in the token economy.”

About Uphold

Uphold is a digital money platform democratizing access to investments and payments using blockchain technology. With more than 1.5 million users globally, Uphold has powered ~$5.3bn in transactions (9/30/19). Uphold provides both retail customers and businesses worldwide with easy access to fiat and digital currencies, as well as precious metals. The San Francisco based firm is opening up global access to financial services that are either ‘hard to reach’ or simply not available in certain regions. Available through the web, iOS, and Android, Uphold is the only financial platform to publish its reserve holdings in real time. The company also has offices in New York, Portugal and London. More information can be found at www.uphold.com, or follow us on Twitter, Facebook, and LinkedIn. Uphold is registered with Fincen in the United States and is an EMD agent of an FCA licensed e-money institution in Europe. Uphold is not a lender, loan broker, or loan arranger and is not offering anyone advice or assistance in obtaining a loan.

New Changes Add Value for SALT Supporters

After identifying and evaluating new ways to add value for SALT Membership Unit (“SALT”) supporters, we’re excited to announce that we’re 1. now accepting SALT as collateral for a cash or stablecoin loan and 2. switching from a staking model to a redemption model.

How will this work when the price of SALT varies across exchanges?

Since Binance and Bittrex delisted SALT in February and May respectively, we’ve been searching for a valid third-party pricing source by which to value SALT. We define valid exchange pricing as the trading price on an unmanipulated market where the trading volume is high enough that a sufficient number of buyers and sellers can establish a price at which to transact. We determined that Binance and Bittrex were the only two exchanges to offer a sufficient market for SALT to provide validity in the previous year. To mitigate this change in pricing validity, we have taken the 60-day moving average from Coinmarketcap.com, using the 60 days prior to the delisting announcement by Bittrex. Using this pricing mechanism, we are recognizing a price of $0.15 per SALT on our platform. If, in the future, SALT is listed on an exchange with adequate trading volume, accessibility, and market depth to provide us with price validity, we will immediately recognize such third-party pricing.

What does this mean if I’ve already staked SALT to secure a loan?

If you currently have a loan with us and you staked SALT to get a reduced interest rate, your SALT will automatically be recognized as collateral in your collateral wallet and your interest rate will remain the same.

What else can I do with my SALT?

We are moving from a staking model to a redemption model. This means that while you can still use your SALT to secure a lower APR on your crypto-backed loan, the new redemption program will allow you to redeem your SALT rather than stake it. The reason we’ve switched to this new model is to offer you value for your SALT upfront. From now on, you can redeem your SALT to reduce your interest rate for lower monthly payments (go to saltlending.com for loan terms and options). The amount of SALT required to do so depends upon the size of your loan.

What if I don’t own SALT?

If you don’t own SALT, these changes will not impact you. Our goal with switching to a redemption model and adding SALT as a collateral type is to reward early supporters of SALT by offering them additional ways to use their SALT tokens the way they were intended to be used — to engage with our lending platform.

SALT Adds Newly Released PAX Gold as Collateral Option in First Regulated Gold-backed Blockchain Asset

We’re proud to announce that beginning October 1, 2019, we will offer the just released PAX Gold (PAXG) as our latest collateral type for clients seeking to use their digital assets as collateral to secure a USD loan. PAX Gold, an asset-backed digital token on the Ethereum blockchain is Paxos’ first blockchain asset to represent precious metal; its value is tied directly to the spot price of gold quoted by the London gold market.

By tokenizing gold, Paxos is bringing the benefits of physical gold ownership to the cryptocurrency community. PAX Gold is built as an ERC-20 token on the Ethereum blockchain network. As a digital representation of physical gold, PAX Gold has the potential to increase the overall liquidity of gold by connecting traditional markets with cryptocurrency markets.

“Precious metals are ideal for tokenization. Gold, as an example, has well-established institutional physical custody and a broad base of investors familiar with the asset class,” said Jenny Shaver, Chief Operating Officer at SALT. “Gold has traditionally been held as a hedge against inversely correlated assets like stocks and fiat currency, so it provides digital token holders with familiar asset diversification options. By offering PAX Gold as our newest collateral type, we’re adding value for our customers by combining the benefits of gold investing with easy access to funds via crypto-backed lending.”

With the addition of PAXG, SALT customers will not only have a wider variety of collateral options, but by using PAXG as their primary collateral, they will be able to maintain a more stable Loan-to-Value Ratio for the duration of their loan.

Founded in 2012, Paxos is a regulated financial institution with a suite of products including the most traded alternative USD-backed stablecoin, the PAX Standard. By integrating PAX Gold as the first widely available physical asset available on a blockchain, we’re taking a step toward realizing our financial vision of a blockchain-based system where the value of traditional assets can be unlocked and used in manifold ways.

“PAX Gold is the first regulated digital asset that allows holders to own the underlying physical gold,” said Scott Simpson, VP of Strategic Partnerships at Paxos. “Unlike fiat currencies, gold has intrinsic value and Paxos allows users to physically redeem their PAX Gold tokens for actual gold. With PAX Gold, people can more easily access this market and with SALT, customers can easily leverage gold like never before.”

“We as a community have been discussing the tokenization of commodities for quite a few years, but Paxos has been the first to make it a reality by representing gold on the blockchain. This is a big step forward for the crypto industry. This brings a new level of transparency to traditional investors by enabling them to see their physical gold represented on the Ethereum blockchain, meaning they can immediately verify ownership,” said Rob Odell VP of Product and Marketing for SALT. “SALT is proud to be a part of this advancement by offering PAXG as a collateral option for crypto-backed loans. Not only does it invite traditional investors to become SALT customers, but it will enable us to be more flexible and creative with our LTV options and loan terms. In fact, if we see significant demand for this product, I think SALT is prepared to re-evaluate our interest rate calculator and open the doors to LTV options as high as 85%.”

Gold has historically been a popular store of value, with the price of Gold increasing by an average of 10% per year since President Nixon took the US Dollar off the gold standard in 1971. With a worldwide market capitalization above $3 trillion, gold is physically scarce, widely traded and offers high liquidity — three key factors that make it not only a viable asset to lend against, but a salient collateral choice for us. Given the current instability in the bond and currency markets, gold’s long-term returns are more comparable to stocks and higher than bonds or commodities.

With the addition of PAX Gold, we now offer loans collateralized by Bitcoin, Litecoin, Ether, Dash, DOGE, BCH, PAX Standard, USDC, and TUSD.

Rewriting the Rules: Women in Crypto

This week Shannon Grinnell, host of the “Speaking of Crypto” podcast spoke with our COO Jenny Shaver for the first episode of her new series, “Women in Crypto.” The series will air each Wednesday and will highlight women in the crypto space who are making waves and challenging the status quo in a predominantly male industry.

In this episode Jenny and Shannon discuss Jenny’s experience at American Express, her thoughts on Libra, SALT’s ability to collateralize the Dash associated with a Dash masternode, and what it’s like to be a woman in a C-level role at a crypto startup. She describes how crypto is a mashup of two traditionally male-dominated cultures — Wall Street and Silicon Valley — and how she feels empowered by our opportunity to be radical — not only in terms of the technology we build, but in who builds it.

“We have the opportunity to break down old ways of thinking and being. That’s where it feels empowering to me. I feel a responsibility as a woman in the space to rewrite the rules, rewrite the narrative and the assumptions around women thriving — not just in the financial or tech industries but in a highly volatile, competitive, complex space where you traditionally don’t see women in these high-risk places. But here we are and we’re thriving.”

Jenny also shares the best piece of advice she’s ever received and how she applies it every day to her current role at SALT: “Don’t ever sit in the back, be present. When you’re at a meeting, sit at the table and make sure you speak. Make sure you’re heard and that you have a voice.”

Listen to the full interview below to learn more about Jenny’s experience and perspective on the future of crypto.

https://podcasts.apple.com/ca/podcast/soc079-jenny-shaver-coo-at-salt-lending-on-crypto-backed/id1384228965?i=1000447481690

Introducing “Worth Your SALT,” Discussions with Industry Leaders that are Worth Your Time

Innovative industries are driven by innovative minds. There’s an array of knowledge within the blockchain ecosystem and here at SALT, we believe highlighting different understandings and perspectives can only facilitate growth within our industry. With this in mind, we’re excited to release our newest video series “Worth Your SALT,” a platform dedicated to interviewing industry leaders and trailblazers currently shaping the way we think about technology. Hosted by SALT Co-Founder Caleb Slade, these segments feature thought-provoking discussions that uncover the stories behind these crypto pioneers and explores their vision for solving problems that aren’t yet fully understood.

In the first episode of “Worth Your SALT” we had the chance to sit down with Shira Frank, Co-Founder of Maiden — an industry-backed lab for universal blockchain education and research — to discuss the importance of humanizing blockchain. Throughout the discussion, Shira tells us about her unique background that has led her to focus on the intersection of ethics/awareness and technology. She leaves us pondering the complex relationship humans have with technology: we constantly think about the ways we’ve shaped and evolved technology, but have we ever truly thought about how it’s shaping and evolving us?

Watch the full-length version to hear more from Shira Frank on the social complexities of advancing technologies.

We’ll be releasing new episodes of “Worth Your SALT” in the coming weeks to highlight perspectives from various areas of the blockchain/crypto industry. Upcoming episodes will feature thought leaders including David Chaum, Jeff Berwick, and Paul Puey, among others.

Missed an episode? You can find the short and full-length versions here. New episodes can also be found on our Twitter and YouTube channels.