Tokens Aave issues to represent an outstanding loan, with variable or stable interest accruing to the balance. They are non-transferable and track what you owe.
A rising debt token balance is interest accruing, which for an investor is not deductible. The loan itself is not income. Repaying with a different token than you borrowed is a disposal of the repayment token.
Not for an investor holding crypto personally; investment interest is limited and generally does not reach crypto. A trade or business may deduct it as a business expense.
Source: IRC 163(d); IRC 1001
Last reviewed September 18, 2026. Tax rules change; confirm current law before acting.
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