Cardano (ADA) has grown in popularity as one of the leading cryptocurrencies, known for its scalable, secure, and energy-efficient proof-of-stake system. However, Cardano transactions—whether buying, selling, staking, or participating in decentralized finance (DeFi)—are all typically subject to taxation.

Understanding how ADA is taxed is essential for any investor or staker. Each activity has tax implications, from buying and selling to earning staking rewards. Depending on your country’s regulations, taxes on Cardano might include capital gains and income tax.

Learn more about what is Cardano?

Is Cardano taxable?

Yes, Cardano is taxable for US taxpayers. The IRS treats all cryptocurrencies, including Cardano, as property. This means that each time you sell, trade, or use Cardano, it triggers a taxable event. If you sell ADA at a profit, the gain is taxed based on how long you’ve held the asset. If it’s less than a year, the tax falls under short-term capital gains, taxed at ordinary income rates.

If you’ve held ADA for over a year, it’s taxed at the lower long-term capital gains rate.

Staking Cardano, earning rewards, or participating in liquidity pools also triggers tax events. Staking rewards, for example, are taxed as income when received, and if you later sell the staked ADA, it’s taxed as capital gains.

What records should I keep for my taxes?

To accurately file your Cardano taxes, you must keep detailed records of every transaction. This includes the following:

• The date and time of your transaction.

• The amount of ADA involved.

• The fair market value of ADA at the time of the transaction in USD.

• Any fees or costs associated with the transaction.

• The type of transaction (e.g., buy, sell, swap, or stake).

Keeping this information organized can help you avoid tax issues and ensure that your reports are accurate. Our platform at TokenTax can simplify the process, as it tracks all of your crypto transactions and ensures that they are correctly accounted for.

How to do Cardano taxes

Cardano taxes can be complicated, particularly if you’ve engaged in multiple transactions like staking, NFTs, and token swaps. Here’s a step-by-step guide to help you navigate:

Cardano tokens

When buying or selling Cardano, you need to track the purchase price (crypto cost basis) and the sale price. If you sold your ADA for more than what you paid, you’ll owe taxes on the gain. If you sold at a loss, you may be able to offset gains from other investments.

NFTs on Cardano

NFTs on the Cardano blockchain are taxed similarly to other crypto assets. If you sell an NFT, it triggers a capital gain or loss based on the value of the Cardano used to purchase it compared to its value at the time of sale.

Token swaps

Swapping ADA for another cryptocurrency or exchanging Cardano tokens for NFTs or other assets is taxable. The IRS treats these swaps as a sale, meaning you must report any capital gains or losses from the transaction.

Liquidity pools and LP tokens

Providing liquidity on Cardano-based DeFi platforms also creates tax liabilities. When you receive LP tokens, it’s often treated as a crypto-to-crypto trade, which may trigger capital gains tax.

Cardano staking rewards

When you earn staking rewards from ADA, those rewards are considered taxable income at receipt. You will need to report the value of the rewards based on the market price of ADA when you receive them. Later, if you sell the ADA rewards, you must report any capital gain or loss based on the difference between the price when you received the rewards and when you sold them.

Learn more about Cardano staking.

Public keys

Public keys allow you to track your transactions across different wallets and exchanges. Keeping a record of all your wallet public keys helps ensure you don’t miss any taxable events. A tool like TokenTax can automatically import your transaction data, including critical public information, and help you organize it for tax filing.

Ensure accurate Cardano tax reports with TokenTax

We created TokenTax to help you handle all the complexities of crypto taxes. Our platform lets you easily import your Cardano wallet addresses, track every transaction, and ensure that all taxable events are reported correctly.

Whether dealing with staking rewards, token swaps, or NFT sales, TokenTax simplifies the process and keeps you compliant. When in doubt, speak to one of our crypto tax professionals for further guidance.

Looking to calculate your crypto profit? Try our free crypto profit calculator.

Learn more about where to buy Cardano.