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)

That said, you should always speak to a tax specialist about your situation if you’re unsure.

If your gain is considered a capital gain, then only 50% of the gain is included in your taxable income. If the gain is considered business income though, then 100% of the net income (income minus allowable expenses/deductions) is taxed. 

In addition to this, 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.

Programs that can help with crypto taxes are Koinly, and Crypto Tax Calculator, and CoinTracking. Koinly has a really good comprehensive resource.

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