Crypto tax in Canada: how the CRA treats your crypto

The Canada Revenue Agency (CRA) describes crypto-assets as digital representations of value that rely on cryptographically secured distributed ledgers. For tax purposes, what matters is what you do with them: buying, selling, trading, gifting and using crypto to pay for things all have tax consequences, and you’re expected to report them on your return.

This guide covers individuals resident in Canada. It explains the federal rules the CRA applies. Your province or territory also taxes this income (in Quebec, through a separate provincial return).

What counts as a disposition

The CRA’s guidance treats these as events you must account for:

• Selling crypto for Canadian dollars or another currency.
• Trading one crypto-asset for another.
• Using crypto to pay for goods or services (a barter transaction).
• Gifting or donating crypto.

Simply buying crypto and holding it is not a disposition. The tax question starts when you dispose of it.

Capital gain or business income?

According to the CRA, depending on your crypto-asset activities, you may realize business income (or loss) or a capital gain (or loss), and the two are reported differently. The difference matters a lot:

• Capital gains: only half of the gain is included in your income.
• Business income: the full profit is included in your income.

There’s no single test. The CRA looks at the facts of your activity: a person who buys crypto and holds it as an investment is in a very different position from someone who trades frequently and in an organized, commercial way. If your activity looks like a business, get advice before you file. This guide focuses on the more common case: holding crypto as an investment, on account of capital.

How to calculate a capital gain

You realize a capital gain when your proceeds of disposition (usually the sale price) are more than your adjusted cost base (ACB) plus the outlays and expenses of making the sale. The ACB is usually what the crypto cost you, plus the expenses of acquiring it.

The CRA then says you must include half of your capital gain in your income for the year. That half is called the taxable capital gain, and it’s taxed at your normal federal and provincial income tax rates.

Your cost is an average: identical properties

Units of the same crypto are identical properties. For identical properties, the CRA’s capital gains guide says you calculate the average cost of each unit at the time of each purchase to determine your ACB.

Example. You buy 1 BTC for $50,000 and later another 1 BTC for $70,000. Your ACB is now $120,000 for 2 BTC, or $60,000 per bitcoin, whichever one you think you’re selling.

You then sell 1 BTC for $80,000.

Step	Amount
Proceeds of disposition	$80,000
ACB of 1 BTC (average)	−$60,000
Capital gain	$20,000
Taxable capital gain (half)	$10,000

The $10,000 is added to your income and taxed at your marginal rate. Your remaining 1 BTC keeps an ACB of $60,000.

Capital losses and the superficial loss rule

If you sell at a loss, the CRA says allowable capital losses (half the loss) can only be deducted against taxable capital gains, not against your salary or other income. If your losses exceed your gains, the net capital loss can be carried back three years or carried forward indefinitely.

There’s an important trap. A loss is a superficial loss, and you can’t deduct it for now, when both of these are true:

1. You, or a person affiliated with you (such as your spouse or common-law partner, or a corporation you control), buy the same or identical property in the period that starts 30 calendar days before the sale and ends 30 calendar days after it.
2. You, or that affiliated person, still own the property 30 calendar days after the sale.

The loss isn’t lost forever. The CRA says you can usually add it to the ACB of the property you bought back, which reduces your gain, or increases your loss, when you finally sell it.

Example. You sell 2 ETH with an ACB of $8,000 for $6,000, a $2,000 loss. Ten days later you buy 2 ETH again for $6,200 and you still hold them a month after the sale. The $2,000 loss is superficial: you can’t claim it this year, but the new 2 ETH get an ACB of $6,200 + $2,000 = $8,200.

Mining and staking

The CRA’s guidance on these activities is specific:

• Mining: in most cases, mining is considered carrying on a business because of the scale and resources involved. If you’re in the business of mining, the value of the crypto you receive must be included in your business income when it’s earned. Mining equipment such as ASIC miners and GPU rigs can qualify for capital cost allowance (CCA class 50).
• Staking: rewards from staking on a centralized exchange will generally be considered income at the time they’re credited to your wallet on the platform.

The value you include as income becomes the cost of those units, so it goes into your ACB for when you later sell them.

Records the CRA expects

The CRA says you should keep, for each transaction:

• The number of units and type of crypto-asset.
• The date and time.
• The value in Canadian dollars at the time.
• A description of the transaction and the other party.
• The addresses of each digital wallet used.
• The beginning and ending wallet balance for each crypto-asset, and its cost.

You’re responsible for keeping these records for at least six years from the end of the last tax year they relate to. Exchanges can close or lose history, so export your data regularly.

Reporting on your return

In broad terms:

• Capital gains and losses go on Schedule 3, Capital Gains (or Losses), in the section for “bonds, debentures, promissory notes, crypto-assets, and other similar properties”, in Canadian dollars. The taxable half flows into your income.
• Business income, for example from mining or trading as a business, is reported as business income. The CRA points to its business income guide (T4002).
• Staking rewards you receive as income are reported in the year they’re credited.

If you’ve missed reporting crypto in past years, the CRA says you may be able to reduce or avoid penalties and interest by correcting it yourself, either by changing your return or by applying to its Voluntary Disclosures Program.

Summary checklist

• Every sale, trade, gift or purchase with crypto is a disposition.
• Decide honestly whether you’re investing (capital) or running a business (fully taxable).
• Use the average cost of identical units as your ACB.
• Include half of capital gains in income; capital losses only offset capital gains.
• Watch the 30-day superficial loss rule if you sell at a loss and buy back.
• Keep complete records, in Canadian dollars, for at least six years.