Cryptocurrency Taxation in Canada

Complete guide to crypto tax rules, reporting requirements, and compliance strategies for Canadian taxpayers.

CRA's Position on Cryptocurrency

Cryptocurrency is treated as a commodity, not currency

Every crypto transaction is a taxable event that must be reported, whether it results in business income or capital gains.

Business Income

100% taxable at marginal rates

  • • Frequent trading (day trading)
  • • Mining as a business
  • • Running a crypto ATM
  • • Staking with business intent
  • • Professional trading setup

Capital Gains

50% taxable (66.67% over $250K)

  • • Long-term holding
  • • Infrequent trading
  • • Personal investment
  • • Passive staking rewards
  • • Buy and hold strategy

Taxable Events

✓ Taxable Transactions

  • • Selling crypto for CAD/fiat
  • • Trading one crypto for another
  • • Using crypto to buy goods/services
  • • Receiving crypto from mining
  • • Earning staking rewards
  • • Receiving airdrops
  • • DeFi yield farming
  • • NFT sales and trades

✗ Non-Taxable Events

  • • Buying crypto with CAD
  • • Transferring between your own wallets
  • • Holding crypto (unrealized gains)
  • • Gifting crypto (but donor realizes gain/loss)

Calculating Gains and Losses

Adjusted Cost Base (ACB) Method

Capital Gain/Loss = Proceeds of Disposition - Adjusted Cost Base - Expenses

Example: Bitcoin Trading

  • • Buy 1 BTC for $40,000 CAD (including $50 fee)
  • • Buy 0.5 BTC for $25,000 CAD (including $30 fee)
  • • ACB = $65,080 / 1.5 BTC = $43,387 per BTC
  • • Sell 1 BTC for $60,000 CAD
  • • Capital gain = $60,000 - $43,387 = $16,613
  • • Taxable amount = $16,613 × 50% = $8,306

Tracking Requirements

  • • Date of each transaction
  • • Type of cryptocurrency
  • • Amount in units
  • • CAD value at time of transaction
  • • Transaction fees paid
  • • Exchange/platform used

Acceptable Valuation Methods

  • • Exchange rate where traded
  • • Average of multiple exchanges
  • • Reputable pricing aggregator
  • • Bank of Canada exchange rates
  • • Consistent method required

DeFi and Special Situations

Staking Rewards

Staking rewards are taxable when received and create a new cost base for those tokens.

Tax Treatment:

  • • Income inclusion at FMV when received
  • • That FMV becomes your ACB
  • • Future sale triggers capital gain/loss

NFTs (Non-Fungible Tokens)

NFT taxation follows similar rules but with unique considerations.

  • • Creating/minting: Business income if done regularly
  • • Collecting: Usually capital property
  • • Flipping: Likely business income
  • • Royalties: Business income to creator

Hard Forks and Airdrops

  • • Hard forks: ACB of $0 until CRA provides guidance
  • • Airdrops: Income at FMV when received
  • • Must track even if value is minimal
  • • Document source and reason for receipt

Reporting Requirements

Foreign Property Reporting (Form T1135)

Required if crypto held on foreign exchanges exceeds $100,000 CAD cost at any time during the year.

Penalties for non-compliance: $25/day up to $2,500 per year

Tax Return Forms

  • • Schedule 3: Capital gains/losses
  • • Form T2125: Business income
  • • T1135: Foreign property
  • • T1 Line 12700: Taxable capital gains
  • • T1 Line 13500: Business income

Record Keeping

  • • Keep records for 6+ years
  • • Export exchange histories
  • • Screenshot wallet balances
  • • Document transaction purposes
  • • Save gas fees and costs

Compliance Best Practices

Do's

  • ✓ Use crypto tax software
  • ✓ Track every transaction
  • ✓ Report all income
  • ✓ File on time
  • ✓ Seek professional help

Don'ts

  • ✗ Ignore small transactions
  • ✗ Assume privacy coins hide activity
  • ✗ Mix personal/business wallets
  • ✗ Forget about foreign reporting
  • ✗ Delete exchange accounts

Red Flags

  • ⚠ Large unexplained deposits
  • ⚠ Lifestyle exceeding income
  • ⚠ Multiple exchange accounts
  • ⚠ International transfers
  • ⚠ Round number reports

Voluntary Disclosure Program

If you haven't reported crypto transactions in previous years, the Voluntary Disclosure Program may help you avoid penalties.

  • • Must be voluntary (before CRA contacts you)
  • • Complete disclosure required
  • • Pay taxes and interest owing
  • • Penalties may be waived
  • • Professional assistance recommended

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