Crypto Taxation Basics
How CRA Views Crypto
| Classification |
Tax Treatment |
| Property |
Not currency for tax purposes |
| Capital asset |
Most common (50% taxable gains) |
| Business income |
If trading is like a business |
| Commodity |
For tax purposes |
Key Principle
Every time you dispose of crypto, it’s a potential taxable event.
Taxable Events
What Triggers Tax
| Event |
Taxable? |
| Buying crypto with CAD |
No |
| Holding crypto |
No |
| Selling crypto for CAD |
Yes |
| Trading crypto for crypto |
Yes |
| Buying goods with crypto |
Yes |
| Receiving as payment |
Yes |
| Staking/mining rewards |
Yes |
| Airdrops |
Yes (when received) |
| Gifts |
Yes (at FMV) |
Not Taxable
| Event |
Notes |
| Buying and holding |
No tax until you sell |
| Moving between wallets |
Same owner, no tax |
| Donating to charity |
Special rules apply |
Capital Gains vs Business Income
Capital Gains (Most Common)
| Feature |
Details |
| Taxable portion |
50% |
| Who |
Casual investors |
| Pattern |
Buy and hold, occasional trades |
| Losses |
Can offset gains only |
Business Income
| Feature |
Details |
| Taxable portion |
100% |
| Who |
Frequent traders, professional |
| Pattern |
High volume, quick turnovers |
| Losses |
Can offset any income |
Which Are You?
| Factor |
Capital |
Business |
| Holding period |
Long |
Short |
| Trade frequency |
Low |
High |
| Time spent |
Little |
Substantial |
| Knowledge |
Basic |
Sophisticated |
| Intent |
Investment |
Profit from trading |
CRA looks at overall pattern, not just one factor.
Calculating Capital Gains
| Calculation |
|
| Proceeds |
Amount received |
| Minus ACB |
Adjusted Cost Base |
| Equals |
Capital gain/loss |
| Taxable |
50% of gain |
Adjusted Cost Base (ACB)
| Calculate ACB |
|
| Total cost of all purchases |
Including fees |
| Divided by |
Total units owned |
| Equals |
ACB per unit |
Example
| Transaction History |
|
| Buy 1 BTC |
$30,000 |
| Buy 0.5 BTC |
$20,000 |
| Total cost |
$50,000 |
| Total BTC |
1.5 |
| ACB per BTC |
$33,333 |
| Sale |
|
| Sell 1 BTC |
$60,000 |
| ACB (1 BTC) |
$33,333 |
| Capital gain |
$26,667 |
| Taxable (50%) |
$13,333 |
| At 30% tax rate |
~$4,000 tax |
Crypto-to-Crypto Trades
Yes, This is Taxable
| Transaction |
Tax Event? |
| BTC → ETH |
Yes |
| ETH → USDT |
Yes |
| Any swap |
Yes |
How to Calculate
| Step |
Action |
| 1 |
Determine FMV of disposed crypto |
| 2 |
Subtract ACB of disposed crypto |
| 3 |
Calculate gain/loss |
| 4 |
New crypto gets ACB = FMV at time |
Mining and Staking
Mining Income
| Type |
Tax Treatment |
| Hobby mining |
Capital gains when sold |
| Business mining |
Income when received + gains when sold |
Business Mining Example
| Event |
Tax |
| Mine 0.1 BTC (worth $5,000) |
$5,000 income |
| Later sell for $7,000 |
$2,000 capital gain |
| Total taxable |
$5,000 + $1,000 (50%) |
Staking Rewards
| Classification |
Tax |
| Income |
When received (FMV) |
| Later disposal |
Capital gain/loss |
Airdrops
Tax Treatment
| Event |
Tax |
| Receive airdrop |
Income at FMV |
| Later sell |
Capital gain/loss from ACB |
If Worthless Initially
| Scenario |
Treatment |
| No value at receipt |
ACB may be $0 |
| Value at sale |
All is gain |
DeFi Transactions
Complex Tax Situations
| Activity |
Consideration |
| Yield farming |
Income + capital events |
| Liquidity pools |
Entry/exit may be taxable |
| Borrowing |
Generally not taxable |
| Lending interest |
Income |
Track Everything
DeFi creates many taxable events—tracking is essential.
Record Keeping
What to Track
| For Each Transaction |
Record |
| Date |
When |
| Type |
Buy, sell, swap, etc. |
| Amount |
Quantity |
| FMV in CAD |
At time of transaction |
| Fees |
Include in ACB or deduct |
| Wallet/exchange |
Where |
| Type |
Examples |
| Crypto tax software |
Koinly, CoinTracker, Coinpanda |
| Spreadsheets |
Manual tracking |
| Exchange history |
Download regularly |
Reporting on Tax Return
Where to Report
| Form/Line |
For |
| Schedule 3 |
Capital gains |
| Line 12700 |
Business income |
| T2125 |
If business |
What CRA Wants
| Information |
|
| Total capital gains/losses |
Net amount |
| Description |
Cryptocurrency |
| Proceeds |
Total sales |
| ACB |
Cost basis |
Crypto Losses
Capital Losses
| Rule |
Details |
| Offset gains |
Yes |
| Offset income |
No |
| Carry back |
3 years |
| Carry forward |
Indefinitely |
Claiming Losses
| If |
Then |
| Net loss this year |
Carry back or forward |
| Net gain this year |
Reduce by losses |
CRA Enforcement
They Are Watching
| Method |
|
| Exchange data requests |
CRA has requested client info |
| Blockchain analysis |
Tracking tools |
| Voluntary disclosure |
Report past errors before caught |
Penalties
| Failure |
Consequence |
| Late filing |
5% + 1%/month |
| Gross negligence |
50% penalty |
| Tax evasion |
Criminal prosecution |
Tax Planning Tips
Legitimate Strategies
| Strategy |
Benefit |
| Tax-loss harvesting |
Offset gains with losses |
| Hold over 1 year |
Still capital gains, but plan timing |
| TFSA (limited) |
Some ETFs available tax-free |
| Donate to charity |
Avoid capital gains tax |
What NOT to Do
| Action |
Risk |
| Not reporting |
Penalties, prosecution |
| Claiming losses for held assets |
Superficial loss rules |
| Incorrect classification |
CRA reassessment |