How Ethereum Transactions Are Taxed

Every ETH swap, sale, or trade is a taxable disposition under most jurisdictions. The IRS treats cryptocurrency as property (Notice 2014-21), meaning each disposal triggers a capital gain or loss calculation. This applies to simple ETH-to-token swaps on Uniswap, selling ETH for fiat, or even using ETH to buy an NFT.

ETH Staking Rewards

Staking rewards on Ethereum are generally treated as ordinary income at the fair market value when received. The IRS confirmed this treatment in Rev. Rul. 2023-14. Your cost basis in the staking reward equals the income recognized. When you later sell or trade those staked ETH, you realize a capital gain or loss from that basis.

Gas Fees and Cost Basis

Ethereum gas fees (paid in ETH) can be added to your cost basis when acquiring an asset, or deducted from proceeds when disposing of one. This is supported by IRS Publication 551 which allows transaction costs to be included in basis. Defitax automatically bakes gas fees into your cost basis calculations.

DeFi on Ethereum

Ethereum hosts the largest DeFi ecosystem — Uniswap, Aave, Compound, Lido, and thousands more. Each interaction (swap, liquidity provision, lending deposit, yield claim) may be a taxable event. Defitax auto-classifies these across all major Ethereum protocols.

WETH Wraps

Wrapping ETH to WETH and unwrapping WETH to ETH are generally not taxable events as they represent the same underlying asset. Defitax correctly handles these as non-taxable with cost basis carryover.

How Defitax Handles Ethereum

Defitax indexes every Ethereum transaction from your wallet — swaps, staking rewards, DeFi interactions, NFT trades, gas fees, and token approvals. Spam tokens are auto-filtered. Gas is baked into cost basis. Connect your wallet and see your full ETH tax picture in minutes.