Crypto Taxes in Canada

When it comes to crypto, something that gets overlooked a lot is taxes.

In Canada, when you sell your coins (even for another coin) or dispose of it (even gifting) this is called a taxable event. Thus, you would get taxed on it assuming that you've realized a gain. However, if all you do is buy and hold though, then you don’t get taxed on it until you sell, again assuming you’ve realized a gain throughout the year.

In terms of how your gain is treated or taxed, this depends on whether the income is considered business income or capital gains as set out by the CRA. There’s no clear definition and it’s a bit subjective based on your personal situation/circumstances. Some, but not all, key indicators that the CRA will look at to help determine what your gain should be classified as:

1) Your holding period of the coins
2) The income gain relative to your other income
3) The amount of time you spend on it/researching it
4) The number of trades you make (frequency)
 

If your gain is considered a capital gain, then only 50% of the gain is included in your taxable income up to $250,000. As of June 25, 2024, for any capital gains over $250,000, that rate increases to 66.67%. As a simple example, if you bought Bitcoin for $4,000 and sold it for $10,000, your capital gain is $6,000. You’d report $3,000 as taxable income (50%). 

However, if your gain is considered business income though, then 100% of the net income (income minus allowable expenses/deductions) is taxed. As an example, you actively trade crypto and made $10,000 but incurred $3,000 of allowable deductible expenses, the income you would report is then $7,000. 

In addition to the above, you also get taxed on crypto interest, staking, airdrops, and yield farming. In terms of how they are classified for income tax purposes greatly depends. The CRA hasn't made any clear distinctions on how they should be taxed.

Now to get a rough estimate on how much taxes you would owe, check out this tax calculator. Just select your province and input your information and the calculator will get you an estimated amount of taxes that you owe.

With all of that said, you should always speak to a tax specialist about your situation if you’re unsure.

If you're looking for a tax specialist in crypto but don't know who to turn to, contact Mahad from Block3 Finance as him and his firm specializes in crypto taxes.

Mahad Mohamed, CPA
mahad@block3finance.com
647-822-2058

Use the referral code "CRYPTOFORCANADIANS" when sending him an email and you will get a FREE 30 minute consultation.

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