The Essential Guide to Crypto Tax in Canada

Do you get taxed on crypto in Canada? Yes. The Canada Revenue Agency (CRA) treats cryptocurrency as property, gains from which are taxed either as business income or capital gains under income tax rates. 

Establishing whether or not your transactions are part of a business is very important: while 50% of capital gains are taxable, 100% of business income is taxable. In this guide, we outline how both categories are reported and taxed.

Canada has no short- or long-term capital gains tax rates. Rather, crypto capital gains in Canada are taxed at the same rate as Federal Income Tax and Provincial Income Tax. Note you’ll only pay tax on 50% of your total capital gains as an individual crypto holder. Professional (day) traders will pay 100%.

Taxes for all provinces and territories (except Quebec) are calculated the same way as federal tax. Here are the 2022 income tax packages with rates for each province and territory.

Income tax brackets in Canada

As noted, crypto capital gains in Canada are taxed at the same rate as Federal Income Tax and Provincial Income Tax, so the above table applies to both income and capital gains from crypto.

For 2022, the tax-free federal basic personal amount is $14,398 (for taxpayers with a net income of $155,625 or less). For 2023, the federal basic personal amount increases to $15,000 (for taxpayers with a net income of $165,430 or less). Note each province and territory also sets a basic personal tax credit amount.

In Canada, crypto is taxed as property and considered either business income or capital gains. 

Canadian taxpayers are not obligated to pay taxes for buying or holding cryptocurrency but are subject to capital gains or business income taxes on crypto sales, mining, or other crypto-related proceeds.

Whether or not your transactions are considered part of a business is essential, as 50% of capital gains are taxable and 100% of business income is taxable.

Crypto is not considered legal tender in Canada, which means when you use it to pay for goods or services it’s considered a barter transaction, with corresponding tax consequences. So when Canadian taxpayers receive goods or services in exchange for crypto, they will have a capital gain or loss on the spent crypto’s change in value since they acquired it.

Canada crypto tax calculation

The first step to calculating your crypto taxes in Canada is to determine whether you’ll pay the 50% capital gains tax or 100% in the case of professional trading or crypto sales as part of a business. In most cases, buying crypto and later selling it for profit is subject to the 50% capital gains tax.

Canada crypto taxes for professional traders

In Canada, professional (day) traders are subject to taxes on business income. Accordingly you will not be able to use the 50% capital gains rate on any profits from professional trading. Instead 100% of all profits will be taxed as business income.

Canadian taxpayers are expected to file and list all capital gains from crypto sales in the income portion of their taxes. Canadians are expected to use adjusted cost basis (or average cost) to calculate capital gains. This means you must average the cost of your purchases in the case of identical properties when making your capital gains calculations.

Taxpayers may offset capital losses from sales of cryptocurrency along with their capital gains. Note that you cannot offset losses from other sources by means of crypto - for instance, if you earn less in your employment income than you may have anticipated. 

If your capital losses are greater than your capital gains, the losses can be carried forward for up to three years.

In most cases, Canadian taxpayers file their capital gains from crypto with a Schedule 3 - Capital Gains form. Business crypto transactions are subject to income tax, not capital gains tax, and should be reported with Form T2125.

The CRA considers crypto to be intangible property and “specified foreign property” in the case where it is held outside of crypto and not used in the course of active business. So if you’re a Canadian resident taxpayer who holds crypto outside of the country, you must file Form T1135 with CRA if the total cost of your specified foreign property (including cryptocurrency) is more than $100,000.

Long-term crypto trades

Canada does not tax crypto based on the duration of your holdings, so whether you trade short- or long-term will not impact your tax obligations. Because Canada only taxes realized gains, you may benefit from holding long-term as a strategy to minimize your crypto taxes. 

There is no tax for simply holding cryptocurrency as a Canadian taxpayer. This means you could, for example, wait to realize profits during a low income year and pay less taxes that you might otherwise. You can also use losses on crypto trades to offset taxable capital gains from cryptocurrencies, stocks, and other investments with a three year carry forward.

Crypto staking, mining, and lending

The CRA acknowledges that crypto staking, mining, or lending can be either personal or business activity and evaluates cases on an individual basis. However, the CRA has indicated that it considers most mining and staking operations to be business activities and accordingly subject to business income tax. 

Mined crypto is generally not taxable at the time of receipt. However when you sell your mined tokens, the usual tax rules for capital gains or business income apply. Calculate the capital gain/loss by subtracting the zero cost basis from the full market value of the crypto on the date of disposition.

A tax professional like ours at TokenTax can help you determine how your staking, mining, or lending income should be classified.

Utility tokens

The CRA has not issued specific guidance around various forms of cryptocurrency, but any gains from the disposition of tokens are taxed as either business income or capital gains. It’s important to keep a record of all your crypto transactions, whatever their purpose, so you can make a full accounting of your acquisitions and any gains or losses from sales.

Crypto as payment for goods and services

Canada considers the use of crypto to purchase goods or services to be a barter transaction. As such, when someone receives goods or services in exchange for crypto, they will have a capital gain or loss on the spent asset's change in value since they acquired it.

There are a number of ways to reduce your crypto tax obligations in Canada.

• Hold your crypto. If you don’t sell, you aren’t subject to gains.

• Take profits in a low income year.

• Loss harvest. You can use 50% of the value of capital losses to offset taxable capital gains from cryptocurrencies, stocks, and other investments with a three year carry forward.

• Make a tax-deductible donation. Most Canadian taxpayers receive tax credits of 15% for the first $200 of donations and 29% for donations over this amount.

• Use a TFSA/RRSP. For the 2022 tax year, the Tax Free Savings Account contribution limit is $6,000. The Registered Retirement Saving Plan contribution is whichever is lower: 18% of your earned income or $29,210. All contributions are tax-deductible, although withdrawals are subject to income tax.

If you need assistance to calculate your Canada crypto taxes, look no further than TokenTax, which is both a comprehensive crypto tax calculation software platform and a full-service crypto tax accounting firm.

With TokenTax, when it’s time to calculate your taxes, you simply import data from every crypto exchange, blockchain, protocol, and wallet and easily sync your transactions via API or upload them in a supported CSV format. 

TokenTax takes the challenges out of your crypto tax Canada filing and guarantees both accuracy and thoroughness. And if you have questions or doubts about your Canada crypto taxes, our experts will be glad to assist.

Business crypto transactions are subject to income tax, not capital gains tax. That means that 100% of profit is subject to taxation. Business income is reported on Form T2125.

The Canadian corporate income tax is 38% of taxable income. After a federal tax abatement for income earned within Canada, it is effectively 28%. Some types of businesses receive additional preferential tax treatment. For example, small businesses are taxed at 9%.

For businesses that do not receive other preferential tax treatment, there is a general tax reduction that brings the rate to 13%. However, although provinces use the federal rate as a guide, they may change the maximum rate. For example, while the maximum rate on Prince Edward Island is 16%, in Ontario, it is only 11.5%.

Day trading: Business income

Example: You derive the majority of your income from cryptocurrency day trading. In the last tax year, you sold $400,000 worth of crypto for $100,000 of profit. Your full $100,000 profit would be subject to income tax.

Mining and staking: Business income (usually)

The CRA acknowledges that crypto mining or staking can be either a personal or a business activity and evaluates cases on an individual basis. However, the CRA has indicated that it considers most mining and staking operations to be business activities and subject to business income tax.

Valuing cryptocurrency as inventory

If cryptocurrency is considered inventory for your business, Canada requires you to value it consistently each year. The CRA describes the following two methods of inventory valuation:

• Value each item in inventory at its cost when acquired or at its current FMV, whichever is lower

• Value the entire inventory at FMV at the end of each year

However, Canada requires that inventory involved in an “adventure or concern in the nature of trade” must be valued at cost. For more guidance on how to value cryptocurrency inventory, contact a crypto tax specialist.

Here are some common answers to frequently asked questions around crypto taxes in Canada.

When will you pay tax on crypto in Canada?

The payment deadline for taxes in Canada for most taxpayers is April 30. If you or your spouse or common-law partner are self-employed, the deadline is June 15.

When is the tax deadline in Canada?

The tax deadline is the same as the payment deadline: April 30 for most taxpayers, Jun 15 if you or your spouse or common-law partner are self-employed.

What happens if I don't file my cryptocurrency taxes in Canada?

In Canada you’re charged a late-filing penalty if you have a balance owing and file your tax return late. You may also be subject to a federal and provincial or territorial penalty if you fail to report an amount of $500 or more.

Is cryptocurrency legal in Canada?

Yes, cryptocurrency is legal throughout Canada.

How are crypto as wages taxed in Canada?

Canada treats wages paid in crypto as regular income, subject to income tax.

Where can I find the cryptocurrency regulation for Canada?

The Canadian Security Regulators oversee regulation of cryptocurrency in Canada.