Got crypto gains? Or even losses? Before you know it, the April 30 tax return deadline will roll around. That’s why we’ve teamed up with our crypto tax calculator partner, Koinly, to guide you through the key rules, rates, and dates you need to know.
Yes, the Canada Revenue Agency (CRA) says that crypto is a commodity for purposes of the Income Tax Act and is subject to tax.
It’s this view that dictates how your crypto will be taxed. It will be subject to Income Tax - either as a capital gain or business income. Understanding the CRA’s guidance on crypto tax is the first step in being able to accurately report any gains or losses realized from crypto disposition to the CRA.
Investors with capital gains and those with business income are taxed differently by the CRA.
Investors with capital gains will only pay Income Tax on half of any capital gain and similarly may offset half of any capital loss when calculating their net gain or loss.
Meanwhile, those with business income will pay Income Tax on the entirety of all profits.
The CRA decides whether a taxpayer has a capital gain or business income on a case-by-case basis, but consider the following guidance on whether you may be conducting business activities:
It’s also important to note that an individual transaction may be seen as business income, while other activities may be seen as a capital gain.
In this guide, we’ll be focusing on the tax implications for individuals investing in crypto. Please note that corporations, trusts, and DAOs may face different tax implications.
The CRA is clear that it is a disposition of crypto that triggers a taxable event. A disposition refers to disposing of an asset. As well as this, there are a number of other transactions that may be viewed as income by the CRA. Activities that may trigger tax consequences include:
As well as this, the CRA is clear that crypto miners may need to pay Income Tax on their mining rewards, depending on whether their mining activities are personal activity or business activity. This is decided on a case-by-case basis.
You can learn more in Koinly’s Canada Crypto Tax Guide.
Calculating your crypto taxes can be time-consuming and the CRA has some very specific rules around how to calculate capital gains and income.
When crypto is held as capital property, the CRA says the only allowable cost basis method is the adjusted cost basis method.
Meanwhile, when cryptocurrencies are considered to be inventory, the CRA says investors may use one of two methods to value inventory consistently from year to year:
Our partner Koinly can help you calculate your crypto taxes using the adjusted cost basis method & superficial loss rule, and generate a variety of crypto tax reports including a Schedule 3, TurboTax, and Complete Tax Report. Better still, NDAX users receive an exclusive 20% discount on Koinly plans with NDAX20.
You need to file your crypto taxes as part of your 2022 tax return. You can do this using paper forms, via the CRA’s My Account service, using a tax app like TurboTax or H&R Block, or via your accountant.
You need to report your crypto capital gains and losses on the Schedule 3 form. Depending on how the CRA views your income, any income from crypto may be reported on the T1 General Form. You can file both of these forms online using CRA's My Account.
Our partner Koinly can help you calculate your Ndax crypto taxes and generate your crypto tax report however you prefer to file. Here’s how it works in five simple steps:
Before you go, the CRA is very clear that they expect investors to keep good records of their crypto transactions and notes that crypto trading platforms have different standards for the kinds of records kept and the time period these records are kept for.
It is therefore recommended to export information from these trading platforms periodically. As stated in CRA guidance, it is the taxpayer's responsibility to keep all records and supporting documents for six years.
Investors should keep records of the following for their crypto transactions:
Sign up to Koinly free today to calculate your Ndax taxes. Ndax users receive an exclusive discount of 20% with code Ndax20.
Disclaimer: This article is not intended to provide investment, legal, accounting, tax, or any other advice and should not be relied on in that or any other regard. The information contained herein is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of cryptocurrencies or otherwise.