How is a liquidity pool deposit taxed in the US?

There is no LP-specific IRS guidance, so it is genuinely two-sided: a deposit or withdrawal can be treated as non-taxable or as a crypto-to-crypto disposal depending on your firm's position. CryptoTaxEdge flags liquidity events as a grey area.

Updated August 2026 · CryptoTaxEdge Team

The two positions, plainly

Disposal view: depositing two tokens and receiving an LP position is an exchange of property for property -- taxable at entry, and again at exit under §1001. Continuity view: the deposit is a contribution to a pooled position you still own -- non-taxable at entry and exit, with economics recognized when the position is finally closed. CryptoTaxEdge's house default is the disposal view; the continuity alternative is documented alongside it, and firms choose.

Why exits are harder than entries

Withdrawals often return the two assets in different proportions than deposited (impermanent loss), plus accumulated fees. Under the disposal view each leg needs a value at exit; under the continuity view the final close crystallizes everything. Fee income is its own event: ordinary income at collection, whichever LP position your firm takes.

Concentrated-liquidity positions

Uniswap V3-style position NFTs add lifecycle events -- minting, fee collects, range changes, burns -- each with its own treatment. The full walkthrough with worked numbers is in the guide linked below.

This is informational only, not tax advice; verify with a qualified tax professional before filing.