Canada Crypto Tax Guide 2024
Welcome to our concise guide on cryptocurrency taxation in Canada, prepared in collaboration with our friends at Koinly. Designed for Canadian individual taxpayers, this guide covers:
- insights into how crypto is treated
- applicable tax rates
- reporting obligations
- strategies for optimizing your tax position
For more detailed guidance, visit Koinly’s complete Canadian tax guide.
Before jumping in, just a word of caution: it is important to discuss your individual tax affairs with your accountant. This guide is for educational purposes only and offers practical information to navigate the complexities of crypto taxation and stay compliant with the Canada Revenue Agency (CRA), but it should not be replaced and should not be interpreted as tax advice.
Is crypto taxable in Canada?
In Canada, cryptocurrency is considered taxable by the Canada Revenue Agency (CRA), treating it as property. Gains from crypto transactions are subject to taxation, with the specific treatment depending on whether the transactions are categorized as business income or investment income, which may result in capital gains and losses. For capital gains, 50% is taxable, while 100% of business income is subject to taxation. For this guide, we’ll focus on capital gains for individuals. It’s important to speak with a qualified professional, particularly if you believe you are running a business.
How is crypto taxed in Canada?
When you incur a disposition, it’s important to consider your tax liability. A disposition can occur through the following:
- Selling for fiat or another asset
- Trading crypto to crypto
- Using crypto to buy goods or services
- Gifting or donating
Ordinary income tax applies to cryptocurrency earned, determined by the fair market value at the time of receipt. For Canadian taxpayers, 50% of capital gains and 100% of ordinary income derived from cryptocurrency are considered taxable.
Crypto capital losses
Made losses on your crypto? You won't incur any Capital Gains Tax on crypto-related capital losses, but there is a silver lining that allows you to leverage these losses strategically to minimize your tax liability.
Offsetting your capital losses against capital gains serves as a valuable tool to decrease your overall tax burden. Adhering to the 50% rule for capital gains, you can offset only half of your net capital loss in a given year. If there are remaining losses after this offset and you have no capital gains in the current year, you can carry forward half of the capital losses to offset against future gains in subsequent financial years. It’s worth noting the CRA also allows you to carry back losses up to 3 years prior using Form T1A.
However, Canada has a superficial loss rule to prevent wash sales. It kicks in when you sell an investment at a loss and re-acquire it within a 30-day period (applies before and after a sale)
This rule prevents taxpayers from creating losses purely for tax purposes where they still intend to hold or repurchase that asset in a short period. You can usually add the amount of the loss to the adjusted cost base of the substituted property.
Crypto tax rates in Canada for 2024
Crypto capital gains in Canada are taxed at the same rates as Federal Income Tax and Provincial Income Tax. Federal income tax bands for 2024 provide a breakdown of rates based on income brackets.
Federal Income Tax Rates for 2024
| Tax rate | Taxable income threshold |
|---|---|
| 15% | on the portion of taxable income that is $55,867 or less, plus |
| 20.5% | on the portion of taxable income over $55,867 up to $111,733, plus |
| 26% | on the portion of taxable income over $111,733 up to $173,205, plus |
| 29% | on the portion of taxable income over $173,205 up to $246,752, plus |
| 33% | on the portion of taxable income over $246,752 |
Can the CRA track crypto?
Despite the degree of anonymity crypto transactions offer, the Canadian government has the capability to trace them. Additionally, the CRA can request information where necessary from taxpayers so it’s important to have accurate record-keeping to substantiate your tax affairs.
Reporting crypto taxes in Canada
Canadian taxpayers should file crypto taxes as part of their annual Income Tax Return. Reporting involves listing all capital gains from crypto sales in the income portion of the taxes. The use of an adjusted cost basis or average cost is required for calculating capital gains, emphasizing the importance of maintaining accurate records of all crypto transactions.
Canada crypto tax filing forms for 2024
Commonly used forms for filing crypto taxes in Canada include Schedule 3 for capital gains and Form T2125 for business crypto transactions. Additionally, Canadian residents holding crypto outside the country must file Form T1135 with the CRA if the total cost of specified foreign property, including cryptocurrency, exceeds $100,000.
Long-term crypto trades
Canada does not impose taxes based on the duration of holding cryptocurrency. Whether trades are short or long-term does not impact tax obligations. There is no tax for simply HODLing cryptocurrency as a Canadian taxpayer.
Staking, mining, and lending
The CRA evaluates earnings through crypto staking, mining, or lending as business income. For hobbyists or individuals, mined crypto is generally not taxable upon receipt, selling mined tokens triggers the usual tax rules for capital gains.
Strategies to minimize crypto taxes in Canada
It’s worth discussing crypto tax strategies with your accountant. The following strategies can help minimize crypto tax obligations in Canada legally:
- Holding crypto without selling to avoid gains
- Taking profits during low-income years
- Harvesting losses to offset gains
- Making tax-deductible donations
Crypto taxes for businesses
The CRA states the following are common signs that you may have business income:
- You conduct crypto activity for commercial reasons
- You promote a product or service
- You show that you intend to make a profit
- Your crypto activities are regular or repetitive
Business crypto transactions in Canada are subject to income tax rather than capital gains tax. This means that 100% of the profit is subject to taxation. The specific tax rate varies based on the type of business, with considerations for factors such as federal tax abatement, preferential tax treatment, and provincial rates.
This blog is not intended to provide investment, legal, accounting, tax, or any other advice and should not be relied upon for such purposes. The information contained herein is for informational purposes only and should not be construed as an offer or solicitation for the sale or purchase of cryptocurrencies.