Borrowing from the exchange to trade larger positions than your balance, with your holdings as collateral and interest charged on the loan.
The borrowing is not taxable; the trades are, and margin interest is generally not deductible for an investor holding crypto (investment interest rules do not reach it cleanly). A margin call that liquidates your position is a disposal at the liquidation price.
Generally not for an investor. Interest on debt to buy crypto is not treated as investment interest the way stock margin interest is. A trade or business may deduct it.
Source: IRC 163(d); No IRS guidance as of September 2026; IRS Notice 2014-21 (property treatment)
Last reviewed September 18, 2026. Tax rules change; confirm current law before acting.
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