How to Pay Taxes on Your Hyperliquid Assets

In today’s financial landscape, Hyperliquid is gaining popularity among investors who seek flexibility and immediate access to their funds. However, understanding how to navigate the tax obligations associated with trading Hyperliquid assets is critical to staying compliant with regulations and avoiding unnecessary penalties. In this guide, we’ll break down everything you need to know about paying taxes on your hyperliquid assets.

What Is the Hyperliquid Exchange?

The Hyperliquid Exchange is a cutting-edge platform designed for trading digital assets. Known for its lightning-fast transaction speeds and deep liquidity, it caters to both retail and institutional investors. By offering 24/7 trading, multi-currency support, and robust security protocols, Hyperliquid ensures seamless execution and has become a cornerstone for efficiency-focused portfolios.

Connecting Your Hyperliquid Wallet to Awaken

To connect your Hyperliquid wallet to Awaken:

1. Go to the Accounts tab on Awaken

2. Click Add Account

3. Type Hyperliquid in the search bar

4. Click Add Wallet

5. Paste your public EVM wallet address (starts with 0x)

Awaken will automatically sync your transaction history on Hyperliquid — including trades, transfers, and DeFi activity.

📌 Note: Hyperliquid uses standard EVM addresses, so by adding your 0x wallet, Awaken will also pull in activity from other supported EVM chains you’ve used with the same address, including Ethereum, Base, Arbitrum, and more.

Why Taxes on Hyperliquid Transactions Matter

Every transaction involving Hyperliquid assets—whether selling, swapping, or earning rewards—can trigger tax obligations. Tax authorities worldwide (including the U.S. IRS) have increased scrutiny on these assets due to their popularity and potential for underreporting.

Does Hyperliquid Report to the IRS?

No. Hyperliquid is a decentralized exchange, so they don't even have KYC information about their customers to report to tax authorities. They are also geo-blocked in the United States as of June 2025.

However, the IRS and other tax authorities around the world may have other ways of finding your wallet addresses, especially if you have ever purchased crypto on a centralized exchange. It's important to report your Hyperliquid activity accurately to avoid any potential future penalties, fines, or worse.

Key Tax Considerations for Hyperliquid Assets

1. Capital Gains Taxes

   • Definition: Profit from selling or exchanging assets for more than the purchase price.

   • Short-Term vs. Long-Term:

     • Short-term (≤1 year): taxed as ordinary income

     • Long-term (>1 year): lower capital gains rates

2. Income Taxes

   • Staking rewards, dividends, and similar earnings are treated as ordinary income.

3. Self-Employment Taxes

   • If trading constitutes a business, net earnings may be subject to self-employment tax.

4. State and Local Taxes

   • Many jurisdictions impose additional taxes on capital gains or investment income; rates vary by location.

How to Calculate Taxes on Hyperliquid Transactions

1. Track All Transactions

   • Record dates, amounts, prices, and fees for every buy, sell, swap, and staking transaction.

2. Determine Cost Basis

   • Original value (purchase price + fees), essential for gain/loss calculations.

3. Classify Transactions

   • Taxable events (sales, exchanges) vs. non-taxable events (internal transfers).

   • Staking rewards are subject to income tax.

4. Calculate Gains or Losses

   • Sale price minus cost basis for each transaction.

5. Account for Deductible Losses

   • Offset gains with losses; if losses exceed gains, deduct up to $3,000 against ordinary income.

Filing Taxes on Hyperliquid Assets

Reporting requirements for Hyperliquid activity vary by country. To find information on your specific tax jurisdiction, see our guide on crypto taxes in over 20 countries around the globe.

1. US investors who have access to Hyperliquid may need to file:

   • Form 8949: Detailed gains and losses

   • Schedule D: Summary of totals from Form 8949

   • Schedule C: If trading as a business

2. Work with a Tax Professional

   • A specialist can ensure compliance and help optimize deductions.

3. Leverage Technology

   • Use dedicated tax software to automate calculations and generate forms.

Online Tools to Simplify Crypto Taxes

• Awaken: Comprehensive tracking and automated tax calculations for crypto and other Hyperliquid assets.

• TurboTax: Built-in support for investments and cryptocurrency, with easy import of brokerage data.

  • Awaken generates TurboTax reports for easy filing.

• Koinly: Global crypto tax platform that calculates gains and produces tax-ready reports.

• ZenLedger: Advanced crypto tax management supporting DeFi and NFT transactions.

Avoiding Common Tax Pitfalls

• Failing to Report Transactions: Always disclose every taxable event, no matter how small.

• Underestimating Tax Liabilities: Set aside sufficient funds to cover your tax bill.

• Misclassifying Transactions: Ensure correct categorization of income, gains, and losses to avoid errors.

Strategies to Minimize Taxes

1. Harvest Tax Losses: Realize losses on underperforming assets to offset gains.

2. Hold for the Long Term: Benefit from lower long-term capital gains rates by holding assets for over one year.

3. Use Tax-Advantaged Accounts: Consider IRAs or 401(k)s to defer taxes on gains.

4. Stay Informed: Keep up with evolving tax laws to leverage new opportunities.

For more details, see our guide on how to reduce your crypto taxes.

Conclusion

Paying taxes on Hyperliquid assets doesn’t have to be overwhelming. By maintaining detailed records, understanding applicable laws, and using professional advice and tools, you can navigate tax season with confidence. Proactive planning is key to minimizing liabilities while maximizing the benefits of your Hyperliquid investments.

FAQs

1. Are crypto-to-crypto trades taxable? Yes. Each trade is a taxable event and must be reported as a gain or loss.

2. Can I avoid taxes by reinvesting gains? No. Reinvesting does not exempt you from capital gains tax.

3. Do I need to report small transactions? Yes. All taxable transactions, regardless of size, must be reported.

4. What happens if I don’t report these assets? Failure to report can lead to audits, penalties, and interest charges.

5. How are staking rewards taxed? Staking rewards are treated as ordinary income, taxed at your marginal rate.