Cryptocurrency Taxes in Canada: What You Need to Know

You’ve heard the saying that only death and taxes are certain — and that remains true when it comes to cryptocurrency. Some investors assume bitcoin, ethereum, dogecoin or other digital assets fall outside the Canada Revenue Agency’s reach, but that is not the case.

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Whether you buy, mine, trade, cash out, gift, or use crypto to buy goods and services, you must track those activities and report any income or gains on your income tax return. Because transactions are recorded on public blockchain ledgers, the CRA can request information from cryptocurrency exchanges and trace activity back to taxpayers.

“I always caution people to make sure they’re reporting all of their income and gains on their tax returns,” says Maneisha Sandhu, a chartered professional accountant and business advisor with Sandhu & Company in Vancouver. The CRA can audit previous tax years and the penalties and interest on unreported income can be significant.

Reporting crypto can be complex because tax treatment depends on the nature of your activity and your intent. Below is a clear overview of how the CRA treats cryptocurrency and what you need to keep in mind when preparing your taxes.

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How does the CRA view cryptocurrency?

The Bank of Canada’s 2014 analysis concluded that cryptocurrencies do not meet the definition of “money” in the traditional sense. Following that guidance, the CRA treats most cryptocurrencies as commodities, similar to gold or oil. For tax purposes, income from crypto transactions is generally classified either as business income or as capital gains, depending on the circumstances of the transaction.

The distinction matters because business income is fully taxable, while capital gains are taxed only on a portion of the gain. As of June 25, 2024, the inclusion rate for individuals on capital gains is one-half (50%) for the first $250,000 of gains and two-thirds (66.67%) on any portion above $250,000. For corporations and trusts, the inclusion rate is two-thirds (66.67%) on all capital gains.

Put simply: if you earn $100, that amount is fully taxable as business income but only partially taxable as a capital gain. If you incur losses, you may be able to claim them depending on whether they are business losses or capital losses.

When is crypto considered business income?

Cryptocurrency received as payment for goods or services is business income. If you’re an independent contractor and are paid in crypto, report the fair market value of that currency on the date you received it.

Mining can be treated as either a business or a hobby; the CRA makes that determination on a case-by-case basis. If mining is a business and you sell the mined coins, the proceeds are taxable. Staking and other yield-generating crypto activities can also create taxable income and should be evaluated individually.

Frequent trading with the intent to profit may lead the CRA to treat your gains as business income rather than capital gains. Factors the CRA considers include:

Frequency and volume of transactions
How long assets are held
Intent at the time of purchase
Time spent managing the activity
Level of knowledge and expertise required

“Identifying your earnings as business income or capital gains is probably the most important reporting decision when it comes to cryptocurrency,” says Riley Storozuk, advanced financial planning manager at IG Wealth Management in Winnipeg. If you’re uncertain which category applies to you, consult a tax professional.

How is crypto taxed in Canada?

Like other capital investments, you report gains or losses in the tax year the asset is disposed of—when you sell, trade, cash out, gift, or use crypto to buy something. Simply buying and holding cryptocurrency is not a taxable event, nor is transferring crypto between wallets you own. Those transfers are typically not taxable.

All other dispositions are taxable. The increase in value between when you acquired the cryptocurrency and when you disposed of it results in either a capital gain or business income; conversely, a decline in value results in a capital loss or business loss, depending on classification.

Crypto exchange-traded funds (ETFs) are treated like other securities for tax purposes. If you hold crypto ETFs inside registered accounts such as an RRSP or TFSA, their growth is tax-sheltered according to the rules governing those accounts.

Crypto record-keeping tips

The CRA requires taxpayers to retain detailed records of all crypto activity for six years. For each transaction, keep the date, a description (purchase, transfer, trade, sale), the type of cryptocurrency and the value at the time of the transaction. Also retain records of expenses related to mining or other business activities involving crypto.

“If you’re using a coin-based exchange, you should be able to pull all that information by looking at your blockchain ledger,” says Maneisha. If you use multiple exchanges, consider using portfolio or tax software to aggregate transactions and generate reports to simplify reporting.

Working with a tax professional can help ensure transactions are classified correctly and that positions taken are reasonable—especially useful if the CRA conducts an assessment or audit.

How to report crypto on your income tax return

If your crypto income is business income, you must complete form T2125, Statement of Business or Professional Activities. Business expenses directly related to earning that income—such as internet, subscriptions, and a dedicated home office—may be deductible, but only the business portion qualifies.

If business income is negative after expenses, you may generate a non-capital loss that can offset other sources of income in the same year. Non-capital losses can be carried back up to three years or carried forward for up to 20 years to reduce taxable income in other years.

Capital gains and losses are reported on Schedule 3 of the personal income tax return. Capital losses can only be applied against capital gains, but those gains need not be from the same asset class—you can use losses from one sector to offset gains in another.

Be mindful of the superficial loss rule: if you sell an asset at a loss and you or an affiliated person (for example, a spouse) reacquire the same asset within 30 days, the loss may be denied for tax purposes.

Is there any way to shelter crypto earnings from income tax?

No — individuals cannot hold most cryptocurrencies directly in registered tax-sheltered accounts such as RRSPs or TFSAs. If you want tax-sheltered exposure to digital assets, consider crypto ETFs or related investments that are eligible within those accounts.

Are NFTs taxable, too?

Yes. Non-fungible tokens (NFTs) are subject to the same tax principles as other crypto assets. The CRA will evaluate the nature of the activity and apply the same business-vs-capital distinction. Keep full records of NFT transactions and seek professional advice if needed.

If you’ve never reported crypto earnings, you may owe taxes plus penalties and interest. Voluntarily correcting past tax filings can reduce or avoid some charges, so consider disclosing previously unreported crypto activity through the CRA’s voluntary disclosure programs or by consulting a tax advisor.

One practical consideration: the CRA does not accept cryptocurrency as payment for taxes. If you owe taxes and your assets are held in crypto, you will likely need to convert holdings to fiat currency to remit payment. Many taxpayers are surprised by this cash requirement when all liquidity is tied up in digital assets.