How to Track Solana DeFi Taxes

Token Swaps Jupiter, Raydium, Orca

Every token swap on Solana is a taxable disposition — even if no fiat (USD) changes hands. When you trade Token A for Token B, the IRS treats it as two separate events: you sold Token A (triggering a capital gain or loss) and bought Token B (establishing a new cost basis).

This applies regardless of the DEX you use. Jupiter aggregates routes across Raydium, Orca, and others — but each underlying swap is still a taxable event.

• ✓ Swap = selling Token A + buying Token B — two events, one transaction
• ✓ Capital gain/loss on Token A = proceeds minus your cost basis in Token A
• ✓ Your new cost basis in Token B = fair market value at time of swap
• ✗ "I never converted to USD" is not a valid reason to skip reporting
• — Transaction fees paid in SOL can be added to your cost basis or deducted as an expense

Even if BONK subsequently crashes to zero, your $500 gain on SOL was realized the moment you swapped. You would claim a separate capital loss on BONK only when you later sell or dispose of it.

Liquidity Pool Deposits & Withdrawals

Providing liquidity is one of the most tax-ambiguous areas of DeFi. The IRS hasn't issued direct guidance, and many crypto CPAs hold different views. Here's the most widely used interpretation:

• ✓ Depositing tokens into an LP likely constitutes disposing of those tokens in exchange for LP tokens — a taxable event
• ✓ Withdrawing from an LP = disposing of LP tokens for the underlying assets — another taxable event
• ✓ LP fee income (your share of trading fees) is generally treated as ordinary income when received or when withdrawn
• ✗ Impermanent loss is NOT directly tax deductible — it's only realized when you withdraw and the actual loss is crystallized
• — Some tax professionals argue LP deposits are non-taxable token conversions — discuss with your CPA before filing

The practical problem is that LP tokens from Raydium or Orca don't always have a clear market price on the day you deposit. You'll need to reconstruct the USD value of each token deposited at the time of the transaction — which is why having a full transaction history with timestamps matters.

Yield Farming & Lending

Solana has a rich lending and yield ecosystem — Marginfi, Kamino, Solend, and others. Each creates distinct tax events depending on how you earn.

• ✓ Interest and yield earned are ordinary income — taxed at your marginal rate, not capital gains rate
• ✓ Record the fair market value of each reward or interest payment on the day you receive it — that's your income amount and your new cost basis
• ✓ Depositing into Marginfi or Kamino creates a lending position — track deposits and withdrawals separately from your spot holdings
• ✓ Reward tokens from farming (e.g., protocol incentives) = ordinary income at FMV when received, regardless of whether you sell them
• — Borrowing against collateral is generally not taxable — but liquidations are, since they constitute a forced sale of your collateral

The most common mistake: people track the tokens they borrowed and repaid, but forget to record the reward tokens they harvested along the way. Each harvest is a separate income event.