The reduction in value a liquidity provider experiences when the prices of pooled tokens diverge, compared with simply holding them. It is not a tax loss while you remain in the pool.
Impermanent loss only becomes a real, deductible loss when you withdraw and dispose of the LP position for less than its basis. Until then it is unrealized, no matter what the dashboard shows.
Only when realized by withdrawing from the pool. It is a valuation concept, not a tax event, while the position is open.
Source: IRC 1001 (realization); no specific IRS guidance
Last reviewed September 17, 2026. Tax rules change; confirm current law before acting.
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