- How do you properly handle the transactions into and out of a staking pool?
- Why isn’t Accointing.com tracking my staked coins?
- How do I classify the interest I received from staking?
If you’ve ever had any of these questions, this article is for you. In this article we will try to answer these questions so you don’t have to worry about overpaying on your taxes.
This article relates to the transaction to-and-from a staking pool, as well as the interest received from staking. The process usually involves a single asset being staked and does not use a special token in the process. If you received a token relating to the pool, please check out our other post about Liquidity Pools.
The Interest Received From Staking
First, we need to go over classifying the interest received from staking, which is pretty straight forward. Receiving interest from a staking pool creates a taxable event, meaning that the transaction itself becomes as taxable event as well. All you need to do is classify the interest deposits as “Staking”. The interest paid could be of like kind or of a separate asset.
The screenshot below provides an example of an interest transaction that has been classified properly:
Handling Your Staking Transactions
The best way of handling your transactions when entering/exiting a staking pool is by classifying them as internal transactions. By doing so, the coins never leave your possession. This is important for for tax purposes, and preserving the value of your portfolio.
To handle your transactions in this way, the following changes need to be made:
- Create a new wallet that represents the asset being staked.
- Make transactions into the new wallet that correspond with the transactions from your real wallet.
- Fix any discrepancies between the coin amounts that were created when exiting the staking pool.
- Classify the transactions as internal.
In the following sections we will explain how to handle this process.
1. Creating The Staking Wallet
Go the “Add Wallet” section of the web app to create a new wallet and give it a name that correponds to the asset and your are staking. In the screenshot below you can see what that would look like if we were staking bitcoin.
Once you click on “Create manual wallet <YOUR WALLET NAME>”, you’re done creating your new wallet. You can close that window or click on the form to add your transactions in the next section.
2. Creating The Corresponding Transactions
Secondly, add the corresponding transactions to the new wallet. To do so we need to look at the transactions in our real wallet and get the timestamp, transaction type, and coin amount. Then make sure to match up every deposit with a corresponding withdrawel and vice versa.
Let’s take the example of staking 0.5 BTC then removing it from the pool 1 hour later. The transactions might look something like the following.
To match the transactions with your new staking wallet, you need to add the following transactions.
Notice the discrepancy when exiting the staking pool, this is caused by the interest compounding on itself rather than creating separate transactions. We will learn how to fix this problem in the next section.
3. Fixing Discrepancies
If you don’t have any discrepancies between your asset to when you first entered the staking pool, then you can safely skip this section and continue on to “Classifying the Staking Transactions”.
To fix the problem in the above example, we would need to manually add a transaction of the discrepancy. That transaction would have to have a timestamp prior to the timestamp of the exiting transaction. It will also need to be classified properly as interest, you can learn how to this in “The Interest Received From Staking” section of this article.
The screenshot below shows what that fix would look like.
Once the discrepancies have been fixed, you can classify the internal transactions.
Classifying the Staking Transactions
Finally, once you unclassify all of your transactions that need to be reclassified as internal, you are ready to classify your new staking transactions. To classify the transactions as internal, go to the “Identify Internals” section of the review process and select the ones you want to change, and click “Approve”.
The example below shows what it looks like when transactions are ready to be classified as internal.
Once approved, your staking transactions should be complete, and your assets value should be tracked if you have not yet exited the staking pool.
Wrapping Up Your Staking Transactions
We have shown how to properly handle your staking transactions, and the interest received from the staking pool. If you were following along with the examples, your transactions should look like the following.