How Crypto Is Taxed in Canada

Trading one coin for another can be taxable in Canada, even though no dollars ever land in your bank account. So can paying for something with crypto, and the CRA expects a record of every one of those trades.

What counts as a disposition

The CRA says you may have disposed of a crypto-asset when you:

• sell it for Canadian dollars or another government-issued currency
• trade it for a different crypto-asset
• use it to pay for goods or services
• give it away or donate it

That list isn't complete, and other situations can count too. Paying with crypto is treated as a barter transaction, because crypto isn't government-issued currency. Moving coins between wallets you own is not a taxable disposition.

When you swap one crypto for another, you've disposed of the coin you gave up. Your proceeds are generally the value of the crypto you received, converted to Canadian dollars at the time of the trade.

Capital gain or business income

A gain on crypto is either a capital gain or business income, and they're taxed differently. Only half of a capital gain is included in your income. If you're carrying on a business, the full profit is reported.

The CRA lists these as signs you may be carrying on a business:

• a history of frequent buying and selling
• holding coins for a short time and turning them over quickly
• knowledge of, or experience in, crypto markets
• spending a substantial part of your time studying the markets
• buying with borrowed money
• advertising that you're willing to buy crypto

It's decided case by case, looking at all the facts. Even a single transaction can be business income if it's an adventure or concern in the nature of trade. If it isn't business income, it's generally capital. Business income is reported the way self-employment income is. Capital gains go on line 15301, with your total proceeds on line 15200.

Half of a capital loss can be deducted, but only against taxable capital gains, not against your wages or other income. Unused net capital losses can be carried back three years or forward indefinitely. Our post on investment income and capital gains has more on how this works.

Mining and staking

The CRA's view is that in most cases mining is a business, because of the scale and resources involved. If you're in the business of mining, the value of the coins you receive is business income at the time you earn it. Mining equipment such as ASIC miners and GPU rigs may qualify for capital cost allowance, and the CRA considers they can fall within class 50.

Staking rewards from a centralized exchange are generally income when they're credited to your wallet on the platform. That's the only staking situation the CRA's guidance addresses directly, so other setups, such as running your own validator node, need a closer look.

GST/HST

Selling crypto that counts as a virtual payment instrument, such as bitcoin, ether or litecoin, is an exempt financial service, so GST/HST doesn't apply to the sale. Mining generally isn't a commercial activity for GST/HST purposes, so a miner doesn't charge GST/HST on mining payments and can't claim input tax credits for it. If your business is registered and accepts crypto as payment, you work out the GST/HST using the crypto's fair market value at the time of the sale.

Records and working out your cost

The CRA expects records for each transaction, including:

• the date and time, the type of crypto and the number of units
• the value in Canadian dollars at the time
• what the transaction was and who the other party was (even if it's only a wallet address)
• the addresses of each wallet you used
• opening and closing balances for each crypto-asset each year, with the cost
• trade and transfer ledgers from any exchange you use

Keep them for at least six years from the end of the last tax year they relate to. Export your exchange history regularly, because if an exchange closes, stops serving Canada or you lose access, that history may go with it.

To value crypto, pick a reasonable method and use it consistently year to year, such as the rate on the exchange you use or an average across several high-volume exchanges. Your adjusted cost base is usually what you paid plus the costs of buying it. For identical properties bought at different prices over time, the CRA's capital gains guide has you work out an average cost at each purchase.

Crypto held outside Canada

Form T1135 is required when a Canadian resident's specified foreign property costs more than $100,000 at any time in the year. Specified foreign property includes funds or intangible property held outside Canada. Neither the CRA's crypto pages nor its T1135 questions and answers say whether crypto on a foreign exchange, or in a wallet you control yourself, counts. If your crypto and any other foreign holdings together could cost more than $100,000, get that answered before you file. Our post on reporting foreign property explains the form.

How we help

We prepare personal returns that include crypto. It takes real extra work, so it's quoted on top of the base return, and we give you the number before any work starts. If several years have gone unfiled, we can work out which ones are missing and file them in order.