How the LUNC burn tax works and where the 1.5% goes

The LUNC burn tax is a fee that the Terra Classic chain itself takes from most on-chain transfers of LUNC. The current rate is 1.5%, set by governance proposal 12223 in August 2026. Of every 1.5% collected, 1.2 points are burned for good, 0.15 points go to the community pool and 0.15 points go to the oracle pool that pays stakers.

That last detail matters more than it looks. Many articles call it a “1.5% burn”, which overstates the burn by a quarter. The calculator in the hero shows the exact split for any amount you type in, and our burn tracker shows what the tax and every other source have removed from supply so far.

How the burn tax works on-chain

Since the v3.3.0 upgrade in December 2024, the tax lives in a dedicated x/tax module. Its one key setting is burn_tax_rate, which reads 0.015 on the live chain. You can check it yourself at the public x/tax rate endpoint. Like every chain parameter, it can only change through an on-chain vote, which our governance guide explains step by step.

When a taxed transaction runs, the module calculates 1.5% of the LUNC being moved and splits it. The burned share is sent to the burn module account, terra1sk06e3dyexuq4shw77y3dsv480xv42mq73anxu. That address does not collect coins over time. At the end of every block, the chain destroys whatever landed there, so total supply drops within about six seconds and the address balance is always zero.

This also explains a common bug. Before v3.3.0, the rate sat in the old treasury module. The upgrade set that legacy tax_rate to zero and stopped using it. Wallets and dashboards that never updated still read the old field and report a 0% tax. If a tool tells you LUNC has no tax, it is reading the wrong endpoint.

Turkish readers searching for “LUNC yakım vergisi” or “LUNC vergi” mean the same thing: this on-chain burn tax, not a government tax. Income or capital-gains tax on LUNC is a separate question that depends on where you live; our Asia hub covers it country by country.

The 80/10/10 split, with real numbers

The split comes from a parameter called burn_tax_split, set to 0.2 since proposal 11514 in May 2023. The name is confusing: 0.2 is the share that is not burned. So 80% of the tax is destroyed and 20% is diverted. That 20% is then halved by the chain’s 50% community tax: one half goes to the community pool, the other to the oracle module, which pays it out to stakers over a window of 9.4 million blocks, well over a year.

Here is a real transfer we traced on-chain. A wallet sent 2,000 LUNC to a Binance deposit address. The chain recorded a tax of 30 LUNC (1.5%). Of that, 24 LUNC went to the burn module and was destroyed in the same block, 3 LUNC went to the community pool and 3 LUNC to the oracle pool. The recipient received 1,970 LUNC.

Scale it up and the pattern holds. If you send 1,000,000 LUNC, the tax is 15,000 LUNC: 12,000 burned, 1,500 to the community pool and 1,500 to stakers. If you send 100 LUNC, the tax is 1.5 LUNC and 1.2 LUNC is burned. The math is flat; there is no discount for size.

There is a cap, technically. The chain stores a tax cap of 60 billion LUNC per denomination per message. No realistic transfer comes close, so for practical purposes the 1.5% applies to the full amount, however large.

Who pays: normal charge vs reverse charge

The current design comes from proposal 12143, “Implement a Simplified Tax Handling”, passed in November 2024 with 93.4% Yes. It replaced an earlier “tax2gas” approach. The specification describes two modes, and which one you get depends on the fee your wallet attaches.

Normal charge: if the transaction fee covers both gas and the tax, the tax is charged on top. You send 2,000 LUNC, the recipient gets 2,000 LUNC, and you pay 30 LUNC plus gas. Reverse charge: if the fee only covers gas, the chain deducts the tax from the amount sent. You send 2,000 LUNC and the recipient gets 1,970 LUNC. The example above was a reverse-charge transfer, and the event log says so with reverse_charge: true.

Either way, the same 1.5% is collected and the same 1.2% is burned. The difference is only who absorbs it. If you are paying an exact amount, such as an invoice or an exchange deposit with a minimum, make sure your wallet adds the tax on top. You can confirm what happened afterwards in any block explorer; our explorer guide shows where the tax event appears.

What is taxed and what is not

“All transactions are taxed” is a myth that has survived since 2022. The code taxes specific message types and skips others. The table sums up what the classic-terra core source does today.

The contract rule matters for anyone using decentralized apps. When you put LUNC into a pool or a swap contract, that leg is not taxed. When the contract sends LUNC back to you, the tax is taken from the payout. So a DEX swap from LUNC into another token is usually untaxed on the way in, while a swap that pays you LUNC loses 1.5% on the way out. Our swap guide and dApp overview walk through what that does to real trades.

Staking is the cleanest case. You can delegate, switch validators and claim rewards without paying the tax, which is one reason we suggest staking from a native wallet rather than shuffling coins between exchanges. See our staking guide for realistic reward numbers.

Binance and the tax exemption zone

People search for the “Binance LUNC burn tax” as if Binance had its own rate. It does not. Binance asked governance for an exemption in 2023 (proposal 11358), and voters agreed to exempt only transfers between Binance’s own wallets. Since the v3.5.0 upgrade in August 2025, those wallets sit in a single on-chain exemption zone called “Binance” that holds 49 addresses, listed at the exemption endpoint.

The zone’s flags for incoming, outgoing and cross-zone transfers are all switched off. In plain terms: when Binance moves coins between its own hot and cold wallets, no tax is charged. When you deposit LUNC to Binance or withdraw it, the transfer crosses the zone boundary and pays the full 1.5%. The 2,000 LUNC example above was exactly that, a deposit to a Binance address, and it was taxed.

Trading on Binance is a different matter. Buying and selling LUNC there happens on Binance’s internal books, so the chain never sees it and no tax applies. Binance said as much in its September 2022 notice. What Binance does instead is burn half of its LUNC spot and margin trading fees each month, a separate program we track on the Binance LUNC burn page.

Want LUNC in your own wallet?

A common route: buy USDT with a card, send it to an exchange that lists LUNC, buy there, then withdraw to a native wallet. The withdrawal pays the 1.5% tax, so check the exchange’s LUNC withdrawal status and fee first.

Create free account

From 1.2% to 0.2%, 0.5% and 1.5%

The rate has moved four times, and the proposal numbers get mixed up constantly. The most common errors: proposal 3568 did not set the tax (it was a signal), 11111 did not set 0.2% (it repealed a re-mint), and 12223 did not pass with 96% (that press figure has nothing to do with the on-chain tally).

1. Jun 2022Prop 3568: the 1.2% ideaA text (signal) proposal, “Tax/Burn 1.2% all transactions”, passes. It changed no parameter, and its “until supply reaches 10 billion LUNC” clause was never coded.
2. Aug 2022Prop 4159: the code pathApproves the Terra Rebels code and the release path for the 1.2% burn.
3. Sep 2022Prop 4661: 1.2% goes liveThe parameter change passes with 99.9% Yes. The 1.2% tax activates at block 9,475,200 on 21 September 2022. Prop 4793 then asks exchanges to apply the burn to off-chain trades, a request that bound no one.
4. Oct 2022Prop 5234: cut to 0.2%Less than a month later the rate drops to 0.2%, with 10% of tax revenue set aside for the ecosystem.
5. Dec 2022 – Jan 2023The re-mint detourProp 10983 re-mints half of burns into the community pool; 11111 repeals it and 11242 stops re-minting altogether. Neither 11111 nor 11242 changed the rate.
6. Feb 2023Binance exemption and the splitProp 11358 exempts Binance’s internal wallet moves; 11360 creates the burn_tax_split parameter at 10%.
7. May 202311514 and 11515: 80/20 and 0.5%The non-burned share rises to 20% and the rate to 0.5%, where it stays for more than three years.
8. Dec 2023Prop 11933: 1.5% rejectedFirst attempt at 1.5% fails with 41.8% Yes.
9. Nov – Dec 2024Prop 12143 and v3.3.0The reverse-charge design passes with 93.4% Yes and ships in v3.3.0 at height 21,163,600, moving the tax into the new x/tax module.
10. Dec 2024Prop 12149: 1.5% rejected againOnly 26.8% Yes, with 27.7% NoWithVeto.
11. Aug 2025v3.5.0: exemption zonesThe taxexemption module arrives and Binance’s wallets move into a single “Binance” zone.
12. Feb 2026Prop 12215: split rework rejectedA plan to cut the burned share to 0.1 points gets 5.0% Yes.
13. 2 Aug 2026Prop 12223: 1.5% passes52.6% Yes excluding abstain (32.4% of all votes, 38.4% abstain, 16.5% NoWithVeto). Executed at block 29,768,317.

The 12223 vote deserves a closer look. Yes votes carried about 231.9 billion LUNC of voting power, No about 90.3 billion, NoWithVeto about 118.3 billion and Abstain about 274.8 billion. Because abstain counts towards quorum but not towards the threshold, Yes needed only a majority of the rest. It got 52.6%, which is a narrow win, not a landslide. The previous 0.5% rate had been in place since May 2023, more than three years.

You can see the change in Binance’s own burns. Its 1 August 2026 batch, sent before 12223 took effect, paid a fee consistent with 0.5% tax plus gas. Its 1 September batch paid 1.5% plus gas. The upgrade path that made all of this possible is covered on our network upgrades page.

What the tax means for users, exchanges and dApps

For holders. Every time you move LUNC between your own wallet and an exchange, you lose 1.5%. A round trip of exchange to wallet and back costs about 3%. That is a real cost for people who move coins often, and a reason to plan transfers rather than make many small ones. Pick a wallet that shows the tax before you sign; our wallet guide compares them.

For exchanges. Exchanges pay the tax on their own on-chain movements and usually pass it on through LUNC withdrawal fees. KuCoin, for example, said in May 2023 that it supports the on-chain tax and charges it on withdrawals. Since trading itself is untaxed, exchanges are largely shielded, which is why most LUNC volume stays on their books. Our exchange list shows where LUNC trades.

For dApps. Contracts that pay out LUNC see 1.5% shaved off every payout, which hurts high-frequency use such as games, micro-payments and arbitrage. Funds that stay inside a contract are not taxed until they are paid out, and IBC tokens are exempt altogether, so app design decides how much tax users end up paying.

For supply. The tax is a steady but modest force. Third-party trackers attribute roughly a quarter of all LUNC removed since May 2022 to the on-chain tax; the largest single share came from one Terraform Labs wallet burn. Our supply page explains how the roughly 6.9 trillion post-crash peak fell to about 6.4 trillion.

The debate: more tax or less?

The burn tax has split the community since day one. The rate went from 1.2% to 0.2% within a month in 2022, then crept back up through 0.5% to 1.5%, with two failed attempts along the way. Both sides have serious points.

The arithmetic behind the last point is worth doing. For the tax to burn 1 billion LUNC, about 83 billion LUNC of taxed transfers have to happen. And with a supply of around 6.4 trillion, even a large burn changes the price math slowly; our $1 analysis runs the numbers on what any burn rate would need to achieve.

Check the tax