Hyperliquid Funding Payments and Taxes: Income or Part of Your Trade?

Hyperliquid funding payments are taxable, but there's no settled answer to how. One common approach treats funding you receive as ordinary income when it's paid and funding you pay as a cost of the position. The other folds funding into the perpetual position's gain or loss when it closes. The IRS hasn't addressed perpetual futures funding, so the choice, and consistency year to year, belongs with you and your preparer.

OddsFile is software, not tax advice. The IRS has not issued guidance on perpetual futures funding, and Hyperliquid doesn't issue tax forms. This article explains the options and sources; a tax professional can tell you which position fits your situation.

How Hyperliquid funding works

Per the Hyperliquid docs:

• Funding is paid every hour. The quoted 8-hour rate is applied at one eighth per hour.
• Each payment equals position size × oracle price × funding rate.
• Funding is peer-to-peer: longs pay shorts when the rate is positive, shorts pay longs when it's negative. Hyperliquid takes no fee on it.

A position held for a month therefore generates about 720 separate funding entries, some positive and some negative. The Hyperliquid taxes guide covers the rest of the account (perps, spot, fees and transfers).

The two approaches

Some crypto tax tools apply the first approach (income at fair market value when received); others treat funding as part of net margin gains and losses. Both are in use. What's not in use, for Hyperliquid, is Section 1256: the 60/40 rule needs a regulated futures contract traded on a qualified board or exchange (IRC §1256(g)), and Hyperliquid isn't one.

The asymmetric risk in the first approach is the one to understand. If you receive $3,000 of funding and pay $2,500, reporting $3,000 of income while the $2,500 has no clear deduction route means tax on money you didn't keep. Individuals' investment expenses have generally not been deductible since 2018 under IRC §67(g). Preparers who use the income approach often net paid funding against received funding for the same position for that reason. Ask how yours handles it.

Worked example

You open a 2 BTC long perp on Hyperliquid at $60,000 on March 1 and close it at $63,000 on April 15. Trading fees: $96 to open, $101 to close. Over those 45 days funding was mostly positive, so as a long you paid more than you received:

• Funding paid: $1,180
• Funding received: $140
• Net funding: −$1,040

Price P&L: 2 × ($63,000 − $60,000) = $6,000. After fees: $6,000 − $96 − $101 = $5,803.

Approach A, funding separate:

• Form 8949 short-term gain: $5,803
• Funding received $140 as other income; funding paid $1,180 handled per your preparer (netted, or no deduction)
• Taxable total: $4,763 if netted, $5,943 if paid funding gets no deduction

Approach B, funding inside the position:

• Form 8949 short-term gain: $5,803 − $1,040 = $4,763

Your cash result is $4,763 either way. The difference is only in classification, timing and whether paid funding gets lost. In a year with positive net funding (say you were short through that stretch), approach A puts the net receipts in ordinary income, which matters if you have capital losses: capital losses offset capital gains without limit but ordinary income only up to $3,000 a year (IRC §1211(b)).

Positions open over December 31

Under approach A, funding paid in December is that year's item even if the position closes in January. Under approach B, everything waits for the close. If you hold a large perp across year end, decide which approach you're using before you compute the year, and use it again next year.

Records to keep

Hyperliquid doesn't issue a 1099, and the decentralized broker rule that might have required one was repealed in 2025 (see 1099-DA explained). You need your own history:

• Funding history from the userFunding endpoint or the Funding History tab: time, coin, size, rate, USDC amount.
• Fills with fees, from userFillsByTime, paged by time.
• Deposits, withdrawals and transfers so they aren't mistaken for P&L.
• USD values. Funding settles in the account's collateral, which you can value at about $1 per USDC; note any day it wasn't.

The API's history depth is limited, so export early and keep the files. Hourly funding means thousands of rows a year; a spreadsheet can do it, but matching each funding row to the position it belongs to (needed for approach B) is where manual work breaks down.

Run the free OddsFile check: paste your Hyperliquid address and see perps, spot and funding broken out, under each treatment, no signup.

FAQ

Is Hyperliquid funding taxable?

Yes. Funding you receive is an economic gain and funding you pay is a cost. What's unsettled is whether it's separate ordinary income or part of the position's capital gain or loss.

Do I report every hourly funding payment separately?

No IRS rule requires a line per payment. Under approach A, preparers usually report a total per year; under approach B, funding is included in each closing trade. Keep the detail as backup.

Does Section 1256 60/40 apply to Hyperliquid perps?

Generally no. Hyperliquid isn't a qualified board or exchange, so its perps don't meet the regulated futures contract definition.

What if I paid more funding than I received?

Under approach B it reduces the position's gain or increases its loss. Under approach A the deduction is unclear for individuals, which is why many preparers net it per position.

Does funding on HYPE or other coins differ from BTC?

The mechanics are the same for every perp. Spot trades and staking rewards are different items; see the Hyperliquid taxes guide and prediction market Form 8949 reporting.