Loans and their repayments

In this article we are going to explain how to enter loan and repayment transactions in CoinTracking.

The following examples cover all coins received through staking, lending, or other DeFi (Decentralized Finance) activities. Examples include various platforms like for example Aave, Lido, EigenLayer, MakerDAO or Nexo.

There are two possibilities to enter a loan and its repayment into CoinTracking, depending on how you and your country's tax laws see the ownership during the loan:

1) You loaning to others

2) You receiving a loan

There are two different options loaning to others:

a) You remain the owner of the coins which you loan

b) You don't remain the owner of the coins which you loan

a) You remain the owner of the coins which you loan

For this method your coins will stay legally yours, will remain in the FIFO sequence of your purchase pool and thus retain their original cost base.

b) You don't remain the owner of the coins which you loan

This will trigger a capital gains calculation for the difference in value between the purchase of the coin and the spend and the coins will be taken out of your purchase pool. When you get the repayment, enter it as Income. 

2) You receiving a loan

To initiate the process, select "Send Collateral".

When you receive a loan from the platform, ensure to document this transaction as "Receive Loan," clearly marking the acquisition of funds. If at any point you decide to repay the borrowed amount, you should select "Repay Loan" to reflect this action within the system. 

In scenarios where your loan balance exceeds the critical margin and enters liquidation, the appropriate response is to choose "Liquidation”. Finally, don't overlook recording the fees as "Borrowing Fee," ensuring all financial activities related to the loan are meticulously tracked and accounted for.

Example: A loan of USDT with ETH collateral

1) Receiving the loan:

a) Send the collateral for the loan

b) Establish the loan as "receive loan"

2) Repayment of the loan:

a) Repay the loan 

b) Enter the borrowing fee

Some providers may charge fees or interest. Record these using the transaction type "Borrowing Fee".

A has taken out a loan of the equivalent of 10,000 USDT and has to pay 1% interest on it. This amount will be recorded with the following transaction types

c) Receive the collateral after repaying the loan 

The taxation rules can change depending on your country of tax liability. It is therefore essential to verify your tax obligations.

In the event of a liquidation, please ensure that all information is accurately recorded (see point 3).

3) Liquidation of the loan  

If a liquidation has taken place, it can be recorded with the transaction type "Liquidation".

b) Liquidation of a certain part

A has sent 5 ETH as collateral and has been partially liquidated. Now A only receives 4 ETH back and 1 ETH is recognized as liquidation.

Special Cases and Interesting Facts

Please note that this is general information, and tax regulations can vary depending on the country. The content presented serves solely to illustrate how CoinTracking handles certain transactions. For individual and legally binding advice, it is recommended to consult a qualified tax advisor.

Asset Remains Unchanged:

If the asset used for the loan remains unchanged upon repayment (i.e., the same cryptocurrency is returned), generally no taxable event occurs. The mere act of taking out a loan and repaying it with the same asset does not trigger taxation, even if the value of the cryptocurrency has changed during the loan term.

A receives a loan of 1 ETH worth €1000 on February 1, 2025. Two weeks later, A repays exactly 1 ETH, now worth €1500. Since A only held the 1 ETH and did not use it, no taxable event occurs. In our system, such transactions are neutralized (set to zero).