Tax Implications of LP Earnings
Earning from liquidity pools has tax consequences that vary by jurisdiction. In many countries, fees you earn are treated as ordinary income at the time they are received. Furthermore, depositing and withdrawing tokens from a pool can be considered a taxable event, potentially triggering capital gains or losses. Impermanent loss can also have complex tax implications. It is imperative to keep detailed records of all your transactions and consult with a crypto-savvy tax professional. Understanding the tax liabilities of your Uniswap Liquidity Pools activity is essential for compliance.