Every swap you made. Every yield harvest. Every time you pulled liquidity from a pool — that was a taxable event. If you’ve been active in DeFi for even a few months, you probably have hundreds of them. Here’s how to use Koinly for crypto taxes so you’re not scrambling when April rolls around.
The good news: there’s software built specifically for this problem. The bad news: most general tax software has no idea what a liquidity pool is. That’s where Koinly comes in — and this guide walks you through it from the beginning.
Why DeFi Taxes Are More Complicated Than Regular Crypto
If you only bought Bitcoin on Coinbase and held it, taxes are straightforward. You report when you sell, calculate the gain or loss, done.
DeFi is different in three ways that make most people’s heads spin:
- Every swap is a disposal. When you trade ETH for USDC on Uniswap, the IRS treats it the same as selling ETH. You need to know what you paid for that ETH (your cost basis) and what it was worth when you swapped it. That’s a capital gain or loss — even if you never touched a centralized exchange.
- Yield and interest are income at receipt. If you’re earning yield from a lending protocol like Aave, or farming rewards from a liquidity pool, that income is taxable at the moment you receive it — at whatever the token was worth on that day. Not when you sell it later.
- LP positions are a nightmare for cost basis. When you deposit two tokens into a liquidity pool and later withdraw them, the ratio has likely changed. The math for calculating your gain or loss involves tracking impermanent loss, fee income, and the original cost basis of both tokens. This is not something you want to calculate by hand.
- Centralized exchange tools don’t see on-chain activity. Coinbase Tax, Kraken’s tax reports — they only know what happened on their platform. Your Uniswap swaps, your Curve deposits, your Compound earnings? Invisible to them. You need a tool that reads directly from the blockchain.
This is exactly the problem Koinly was built to solve.
What Koinly Does (And What It Costs)
Koinly is a crypto tax software that connects directly to your wallets and exchange accounts, imports your full transaction history, classifies each transaction, and generates tax reports in formats your accountant (or tax software) can use.
It supports over 700 exchanges and wallets, and crucially — it reads on-chain data directly. Connect your Ethereum address and it can see your Uniswap swaps, your Aave deposits, your Compound earnings. Connect your Solana wallet and it reads that chain too.
Supported chains include: Ethereum, Solana, Bitcoin, Polygon, Arbitrum, Optimism, Avalanche, BSC, and dozens more. If you’ve been using DeFi on any major network, Koinly almost certainly supports it.
Koinly Pricing (As of 2025)
- Free plan: Import transactions and preview your tax summary — but you can’t download the actual reports. Good for getting a sense of what you owe before you commit.
- Newbie plan (~$49/year): Up to 100 transactions. Fine if you did a small amount of DeFi activity.
- Hodler plan (~$99/year): Up to 1,000 transactions. This is where most active DeFi users land.
- Trader plan (~$179/year): Up to 3,000 transactions. For power users with lots of on-chain activity.
Before you pay, do the free import first. It will tell you how many transactions you have. That determines which plan you actually need.
How to Connect Your Wallet and Import Transactions
This is the core of the Koinly tutorial — getting your actual transaction data into the system. Here’s the process step by step.
Step 1: Create a Koinly Account
Go to Koinly.io and sign up. You don’t need to pay yet — start with the free plan and see what you’re working with.
Step 2: Add Your Wallets
From your dashboard, click “Add Wallet.” You’ll see options for exchanges and blockchains.
For on-chain wallets (MetaMask, Phantom, hardware wallets), select the blockchain (Ethereum, Solana, etc.) and paste in your public wallet address. This is read-only — Koinly cannot move funds or sign transactions with just your address. You are not giving it access to your money. It’s reading the public ledger the same way a blockchain explorer would.
For centralized exchanges, Koinly connects via API key. In your exchange settings, generate a read-only API key (most exchanges offer this option). Paste the key into Koinly. Again, read-only — it can see your history but cannot make trades.
Step 3: Let It Import
Koinly will query the blockchain and pull in your full transaction history. For wallets with years of activity, this can take a few minutes. For most users, it’s quick.
Once imported, it classifies each transaction: buy, sell, swap, transfer, staking reward, lending income, etc. It gets most of them right automatically. Complex DeFi interactions sometimes get flagged for review — that’s normal.
Step 4: Review and Fix Classifications
Go through flagged transactions. The most common issues:
- Transfer vs. trade: Moving your own ETH between wallets you own should be a transfer, not a taxable event. If Koinly doesn’t recognize both addresses as yours, it may classify it wrong. Add both wallets to your account and it can match them.
- Staking deposits: Sending ETH to a staking contract isn’t a taxable event — it’s a deposit. Make sure it’s classified correctly, not as a sale.
- LP deposits and withdrawals: Koinly handles most major protocols automatically, but occasionally you’ll need to manually classify these. The help documentation covers it by protocol.
Take your time here. Incorrect classifications mean incorrect taxes. An hour of review now is worth it.
Generating Your Tax Report
Once your transactions are imported and reviewed, Koinly calculates your tax liability automatically. The summary shows:
- Total capital gains (short-term and long-term, separated)
- Total income (staking rewards, yield farming, interest)
- Cost basis method used (FIFO by default; you can change this)
With a paid plan, you can download your report in multiple formats: IRS Form 8949, Schedule D, TurboTax-compatible CSV, or a general report for your accountant.
One important note on cost basis methods: Koinly defaults to FIFO (first in, first out), which is the most common and generally IRS-accepted method. However, some users benefit from HIFO (highest in, first out) — selling your highest-cost assets first can minimize gains. Talk to a tax professional if you’re unsure which applies to your situation. Koinly supports multiple methods, but choosing the right one for your specific circumstances is outside what software can decide for you.
The Bottom Line: Do This Before You Need It
The biggest mistake DeFi users make with taxes is waiting until tax season. By then, you’re scrambling, stressed, and potentially missing transactions from exchanges that no longer have your data or APIs that have changed.
Set up Koinly now. Import your wallets. Do the free preview. Even if you don’t pay for a report yet, you’ll know what you’re looking at — and you’ll avoid the April panic that catches so many people off guard.
Knowing how to use Koinly for crypto taxes isn’t just about filing correctly. It’s about understanding the actual cost of your DeFi activity, making smarter decisions going forward, and not being blindsided by a tax bill you didn’t see coming.
This post is part of the Safe DeFi: Your First 90 Days series. Want the full framework for navigating DeFi safely from wallet setup through tax tracking? Download Wallet Security: Your Complete Setup Guide — free.