How is Cryptocurrency Taxed in Canada?
**Note, I am not an accountant, nor am I an expert on cryptocurrencies. You should seek the advice of an accountant with experience in cryptocurrencies if you have any serious questions or concerns.
Are you wondering how is cryptocurrency taxed in Canada? With the explosion of Bitcoin, Ethereum, and whatever other cryptocurrencies that currently exist or will come to exist, many people are starting to invest. There’s money to be made (or lost), and you need to pay your fair share of taxes.
If you invested early, you could have easily become a millionaire. As with any hot investment, many Canadians are trying to jump on the bandwagon so they too can make a fortune. Regardless of how much profit these investors make, they’re going to have to eventually deal with taxes. Below you’ll find some common questions and scenarios when it comes to cryptocurrencies in Canada and how to deal with them. If you’re new to cryptocurrency, be sure you read this post on the 7 things you need to know about cryptocurrency before you start investing.
- How is cryptocurrency taxed in Canada?
- Buying goods or cryptocurrencies with cryptocurrency
- Moving cryptocurrency from one wallet to another
- Keeping records of your transactions
- Cryptocurrency tax breaks
- Should I use an accountant?
- Trading cryptocurrency in your TFSA and RRSP
- What if I don’t report my cryptocurrency gains?
- How does cryptocurrency affect my credit score?
- Final thoughts
How is cryptocurrency taxed in Canada?
Cryptocurrency is taxed like any other commodity in Canada. 50% of the gains are taxable and added to your income for that year. Let’s say you bought a cryptocurrency for $1,000 and sold it later for $3,000. You would have to report a capital gain of $1,000 (50% of $2,000) which would be added to your income and taxed at your marginal tax rate.
Note that the above scenario applies to normal buy and hold investors. If you’re a high volume trader e.g. someone who holds cryptocurrencies for a short period of time or day trades them, the CRA may consider it a business and you’ll have to file your taxes accordingly.
Most people who invest in cryptocurrency aren’t going to buy and hold. They’ll likely be trading it around. While you don’t get taxed for owning crypto, there are events that are taxable such as:
- Selling or gifting cryptocurrency
- Trading or exchanging the cryptocurrency for another cryptocurrency
- Converting cryptocurrency into fiat
- Using crypto currency to buy goods
Every time you buy, sell, or trade cryptocurrency, it’s a taxable event and needs to be reported on your taxes. There is no way around this so do keep detailed records.
Buying goods or cryptocurrencies with cryptocurrency
Here’s where things get a touch complicated. You’re required by law to keep records of your trades. If you didn’t keep records, you need to make your best guess and hope the CRA doesn’t audit you.
These records are vital due to the capital gains you make. Now keep in mind that capital gains can apply in more than one circumstance.
Let’s say you bought 1 Bitcoin for $100 but it has a current market value of $15,000. You decide to make renovations to your home and the contractor agrees to trade his services which are normally worth $15,000 for 1 Bitcoin.
In this case, both parties are liable for taxes. The original Bitcoin owner would pay capital gains on $7,450 (50% of $14,900) while the contractor would still need to report business income of $15,000. The CRA covers the details of taxes for this transaction in this post.
When trading entire amounts, things are easy. However, if you purchase cryptocurrencies at various times at different prices, you need to log all those transactions and calculate your adjusted cost base when selling later.
Moving cryptocurrency from one wallet to another
If you’re simply moving your cryptocurrency from one wallet to another e.g. from Coinbase to GDAX or your own wallet then it would not be a taxable event as long as you haven’t sold any of your cryptocurrency during the process.
That being said, there might be some tax implications . . . sort of.
Let’s say you paid a $10 transfer fee, well that would be a transaction cost which you could deduct from your capital gains later. The same applies to any fees you incur when you buy or sell your crypto.
Keeping records of your transactions
Many cryptocurrency exchanges have terrible records, so you shouldn’t rely on them to get all of your trading history. You’re better off keeping a detailed summary of all the trades you make. Start a spreadsheet and start tracking the following:
- Transaction dates
- Buy, sell, and trade values
- Units bought, sound, or traded
When possible, you’ll also want to keep records of the following:
- Receipts of purchase
- Digital wallet records
- Cryptocurrency addresses when trading with other individuals
- Exchange records
Basically, you want to keep as many detailed records as possible. There’s nothing illegal about owning or trading cryptocurrency, but the CRA wants their fair share of taxes. To calculate what you owe, you’ll need all of your records. They’ll also be handy if you ever get audited.
Cryptocurrency tax breaks
There are a few situations where you can use cryptocurrency to lower your taxes. Any capital losses from cryptocurrency can offset any capital gains. To be clear, this only applies if you have capital gains to claim. If you went all YOLO with your savings on cryptocurrency and lost everything, you wouldn’t be able to claim that to reduce your income.
If you run a cryptocurrency business such as mining, trading, or an operating an exchange, you could claim any relevant business expenses on your taxes. That could include things such as utilities, rent/mortgage, computer equipment.
Should I use an accountant?
If you’re unsure about how to handle your taxes, speak to an accountant who has experience with cryptocurrencies who can guide you through the process or file your taxes on your behalf. That said, they’re still going to need some kind of paper trail to help you out.
Another solution is to try TurboTax Live Full Service since you’ll get access to a tax expert who can file on your behalf. You can ask them as many questions as you want and you only get charged when you actually file.
Trading cryptocurrency in your TFSA and RRSP
With any potential capital gain, investors will always try to shelter themselves from taxes. The next logical question people ask is can I trade cryptocurrency in my TFSA and RRSP?
No, you can’t. Nor can you transfer any Bitcoins you currently have into your TFSA or RRSP. Cryptocurrencies operate on their own exchange which does not tie any accounts which are tax friendly. That said, there are now cryptocurrency ETFs that can be purchased within your TFSA or RRSP.
What if I don’t report my cryptocurrency gains?
You’d be breaking the law, it’s called tax evasion which is a crime that could get you sent to jail. The CRA likely won’t go as far as sending you to jail, but they do want to ensure that they’re getting their cut.
If you fail to report your taxes or you file incorrectly, the CRA could charge you penalties and interest later which could cost you a fair amount of money. Considering how big of a deal cryptocurrencies are right now, there’s a good chance that the CRA is keeping an eye on things.
You may think that these transactions can’t be traced back to you, but user names exist and so do the exchange records.
How does cryptocurrency affect my credit score?
Your decision to invest in cryptocurrency has no effect on your credit score whatsoever. Your credit score only gets affect when a lender needs to look at your credit history or if you currently have a contract in place where you need to make regular payments. For example, applying for a new credit card, or your payment history with your wireless provider would affect your credit score.
Even though cryptocurrency doesn’t affect your credit score directly, that doesn’t mean you shouldn’t know where you stand. Your credit score is a number between 300-900. The higher the number, the more creditworthy you are. This is essential if you ever need a loan in the future as lenders want to know that they can trust you to repay the loan. If you want to know what your credit score is, you can check it for free with Borrowell.
How is cryptocurrency taxed in Canada is not an easy question to answer as there are many different things to consider. Canada’s tax system is fair, don’t try to cheat it unless you enjoy committing fraud. Note that if you get a Cryptocurrency credit card, technically the rewards would be taxable too.
What about gains from mining crypto currencies?
If you’re making a profit from mining cryptocurrencies, then you’ll need to pay tax for it. It would be wise to seek the advice of an accountant who has experience with cryptocurrencies.
Let’s get this straight…the government and central bank is saying they want nothing to do with cryptos. But only want a piece of the gains realized. In short the risks are yours but only gain are ours. It simply sounds like theft and bullying.
Thank you your article.
What about crypto to crypto (Btc to eth to xrp to etc)?
. Do we declare each transaction as a capital gain even if we never cashed in in cad during the year? (Or keep track of them to pay taxes but only at the time of cashing in in cad.. even if it takes years)
. Do Canada have a policy for tax free long trades (held for over a year) like the US do?
Yes you declare each transaction. Trading cryotocurrency to cryptocurrency is a taxable event, you would need to figure out the fair market value of each currency at the time of the trade which can be difficult.
There’s no such thing as tax-free long trades unless it’s held within your TFSA. Unfortunately, cryptocurrencies cannot be bought in your TFSA. As far as I’m aware, the US does not have any tax-free long trades.
If you’ve made a profit, make sure you keep records of all the details including the exact time a trade happened so you can calculate the value at the time. You’ll want to speak with an accountant who has experience with cryptocurrencies.
Hi, just to be more precise with the previous question.
I understand every trade is a taxable event. But does this mean it will be taxed the same year even if no conversion to CAD was done, and any deposit was put to my bank account ?
Correct, it still counts as a taxable gain or loss in that tax year.
That makes no sense how can you be taxed on money that you haven’t realized? Government doesn’t accept cryptocurrency as payment. So how can I pay them with cash that doesn’t even exist?
If you bought an security and then sold it at a gain, it’s a taxable event. Just because you haven’t withdrawn any physical cash from your accounts doesn’t change that fact. This is no different from selling stocks and not withdrawing the money from your account.
WHile it maybe a “taxable event,” there is NO CASH that is materialized which is what governements accept to pay for taxes. It absolutely is different from selling stocks because you have actual legal tender that the government accepts. Quote all these articles to your hearts content but this does not answer the underlying concern. Unless you are trading than converting to fiat and putting that money aside and then rebuying in with that money can this type of even actually be taxable. If somebody was trading last year and traded at record highs with alot of crypto and that crypto becomes worthless the next year. The tax payer is on the hook for an excess of taxes that the investor can not afford to pay because they continued to hold crypto assets> Absolute non sense.
You’ve clearly already made up your mind but taxable events are still taxable even if no cash is materializes. I could switch mutual funds non stop and each even is taxable even thigh cash is not realized.
In the scenario which you state where the crypto currency becomes worthless, the capital loss would off set any gains, but you would still be on the hook for any excess taxes owed.
One can purchase a “Profit Trailer” which essentially is a bot that makes trades automatically. There could be hundreds of trades per week depending on the parameters that you establish within the system and the market trends.
The administration to track all these trades and record miniscule profits would be staggering.
How would CRA view this?
Each trade is a taxable event so you would need to track each for the purpose of taxes.
Not true. At the end of the calendar year you simply pay tax on the sum of all realized profits you’ve made from that year. You could have a thousand different transactions, but so what? If at the end of the year you’re up $10k total, then that is simply the amount you deal with. If you were up $10k a week before the year end, and you bought a bunch of coins with all the profit, then you still don’t pay any tax as you only have unrealized profit now, aka your money is tied up again.
But each transaction you made to put you up $10K is a taxable event. Just because you bought $10K more in coins a week before the year is up that doesn’t mean you don’t owe taxes.
Now, if you bought $1K in Crypto in Jan, and didn’t make any trades with it, but as of Dec. 25th, it’s worth $10K and you haven’t sold it. Then yes, it’s an unrealized gain.
However, if you traded that $10K in crypto for something else on December 26th, it’s a taxable event.
But using your theory you would be paying taxes on unrealized profit! So if the $10k you put into new coins on Dec 25th dropped to $0 on Dec 31st, you would be paying taxes on $10k worth of money that simply doesn’t exist. It is not a gain. It did not increase your net worth. It’s only AFTER you actually sold and put a realized profit into a taxable account or withdrew as cash or used the profit that you must pay taxes on it. You could make a million dollars in unrealized profit and then lose it all and be just fine with the CRA. They would start bankrupting people quite quickly otherwise. You can juggle your unrealized profit around as you wish your entire life, whether you buy more of a coin, buy a new coin, or both, and still never pay taxes on it. BUT once you decide you want that profit, and cash it out or buy goods or services with it, then the amount that all the profits added up to at the end of that calendar year is absolutely taxable.
Glenn I’ve been arguing the exact same thing. In fact I know a guy who called into the CRA and they say when you cash out is when you pay. While all these sources say otherwise – I agree with this understanding to be the correct one. The other way of taxing would put people in a very compromising position,
I would never trust someone who simply said they talked to the CRA and they said you only pay when you cash out. I advise speaking to an accountant for yourself and see what they say.
Can you provide a CRA document that outlines these rules? This is a bit like comparing apples to oranges, because in traditional markets you can’t trade stocks to stocks, or commodity to commodity. The dollar is always used as the median, which makes sense for taxing purposes. Trading crypto to crypto is essentially impossible to track dollar-wise.
The CRA doesn’t have any formal documents about how crypto is taxed. My article is based on conversations with accountants who file taxes for their clients that own crypto.
“However, if you traded that $10K in crypto for something else on December 26th, it’s a taxable event.”
It’s called capital gains, because you literally gain capital. How does moving money you have in one coin to another coin gain you any capital?? You could easily lose it all the next day. But oh well too late you already paid taxes on imaginary money that you never actually gained. Doesn’t that sound ridiculous? If you don’t ever sell, and keep all profit unrealized, then there is nothing to claim. You did not gain anything. If you sold, then absolutely.
We can agree to disagree, and I recommend you speak to an accountant regardless. But think of bitcoins as commodities for a second.
You buy $1K in gold in January.
In December, it’s worth $10K and you decide to trade it for $10K in silver.
Well even though you haven’t sold, you’ve gained $9K since that trade was a taxable event.
Now if you didn’t make that trade and kept it as gold, then yes, you’re right, it’s an unrealized gain.
Buying bitcoin or any other cryptocurrency and holding it until you’re ready is straightforward. However, if you’re trading various currencies, you need to consider them a taxable event.
Another example is if I owned a mutual fund and I want to switch it to a different fund. Although I’m making a switch, I’m technically selling one fund to buy another. If the fund I’m selling had gone up in value, I’m paying capital gains (or claiming a loss) on that switch.
That just seems so crazy to me. I can’t seem to make sense of it, but I appreciate your patience, lol. So if that silver you bought went down below the $1 you paid in gold to buy it, it’s not like you would get reimbursed for the taxes you paid on lost money, so would lose money twice. Even though you never realized any profits, you just kept it all in commodities?! That’s almost like stealing 🙂 I thought for sure it was simply just a big tally of any actual real profit you took from liquidating your coins or commodities in a given a year that you get taxed on. Thanks for enlightening me!
Well you could technically get those taxes back. If you sold it at $1, you now have a realized loss of $9,999 which is a capital loss that pretty much cancels that gain of $9K you made when you made the trade. Make sense?
You’re half right. Like I said, as long as you’re not trading or selling, it’s an unrealized gain. Adding additional funds and buying more crypto is also not a taxable event. But once you sell or trade, it’s a taxable event even if you don’t physically take the money out of your account.
Now if this was within your TFSA (where crypto can’t be traded), then those tax events would not apply.
Thanks Barry. You’re very helpful. For an example, I put $90 CAD into a Crypto Wallet, and then used that cash to buy Bitcoin on Dec 20, then leave the bitcoin for say, a month (Jan 20) and that $90 worth bitcoin is now $180 worth; it doubled. I decide to cash that bitcoin back to Canadian Dollars and deposit $180 into my bank account. That money is now taxable since I made a gain of $90. So half of the $180 is taxed?
Since your gain is only $90 ($180 – $90) you pay capital gains on 50% of that amount works out to $45.
Yea ok I getcha, capital loss makes sense. I didn’t think you would have to claim both the gain and the loss if they cancel each other out, simply the outstanding profit. Thanks for helping me understand 🙂
So technically, the reverse is also true… You buy for 20,000, it goes down in price to 5,000 and you exchange it for another coin, making the taxable event a capital loss of 15,000. If the new coin you just exchanged for goes up in price to 50,000 the capital gain of 35,000 isn’t taxable until you traded or sold it.
True for the first half, but the capital gain would be 45,000 since you bought for 5,000
Taxation is theft.
Taxes is what pays for all the services you get from the government such as free healthcare.
I’m not completely against taxes, but they over tax everything. In my province, you can’t even find a family doctor. So while I may get free healthcare, I’m not receiving adequate healthcare for the taxes I pay.
Not to be a you know what, but if we pay for healthcare then it is not free.
We pay taxes for services rendered (no matter how poor the services) which is the notion of taxation.
So the easiest way to deal with crypto transactions is to buy a lump sum a few times a year, record market values at that time. Leave them alone and only claim capital gains when cashing them out? As long as they remain the same crypto it is only an unrealized gain until they are sold?
Correct, you would basically be buying and holding until you’re ready to sell. The gain or loss only gets reported when you actually sell.
The only thing you need to record is the date and amount of $ you invested. You can always refer to the chart for price when you did. Most crypto exchanges provide monthly statements and if you don’t receive an email, you can always refer to your account history
great info Barry, thanks
Excellent thread, thanks all.
So , if I buy digital currency keep track of purchase price , and hold it , I only have to report capital gains, or loss on the portions of digital currency I decide to sell in the taxation year i sell them ?
Correct. So say you buy for $1,000 in 2018, but then sell in 2020 at a price of $10,000. You would have a capital gain of $9,000 which would be reported on your 2020 taxes.
Thank you Barry !
What if the crypto moves wallets? if I move 1 BTC from my wallet on the mining pool I use to my private wallet? is that taxable? I’m not selling or trading it for another type of crypto, just moving from place to place.
To me, that sounds something similar to switching brokerages with say stocks so it wouldn’t be taxable.
Hi Barry, regarding the duration of the “hold period”
1) What is considered as long enough of a “hold” on the crypto before selling to not be considered as a business trader? You previously gave an example of 2018(buy) to 2020(sell); what if you held it for one month instead of two years, let’s say Feb.2018 (buy) to March 2018 (sell)?
2) Could it be even shorter than 1month? e.g. 1week perhaps? Or even days?
3) And how many trades are you allowed per taxation year before being deemed as a business trader?
What you’re describing is a bit of a gray area which is sort of referenced in this article.
How long you hold it may or may not matter to the CRA. Holding something for a week or days is not uncommon. But lets say you made 100 trades in 2 years, you might get flagged.
That being said, if you have a full time job that has nothing to do with investing, you could argue that it’s purely a hobby so it should be taxed as capital gains and not regular income.
As for how many trades you’re allowed, that again falls into the whatever the CRA feels like area. There’s no set number.
I have a few questions about business income vs capital gains.
If I made around 100 trades last year simply to balance my portfolio with the goal of holding my coins for at least a year or more:
1. For 2017 I expect it would be considered as business income even if I only made something like 400$, but with that in mind, do I still calaclute my gain using the ACB method and can I just input all my gain in 1 income labeled as « Cruptocurrency gains »?
2. If I don’t trade during this year but I sell all my coin at the end of this Decembre, would it be considered as capital gains?
I find it complicated when there is grey zone like that.
To be honest, it’s really hard for me to advise you there. It’s completely a gray zone and you could argue that it’s not business income despite the fact that you made a 100 trades if this isn’t your full time job. I’d honestly look for the advice from an accountant who has experience with cryptocurrencies.
If you didn’t trade during the year, and you sell at the end of December, for sure it would be a capital gain.
Thanks for taking the time to write this article and answer all the comments. Here’s my situation:
I invested close to 10k on btc during the summer and fall of 2017. I bought through a btc atm with spare cash i had. In october and november i started to diversify my portfolio (eth, xrp, ltc, bcc, etc) and invest in some ICOs through different exhanges. In december i started doing short term trades to diversify even more (and minimize risk). I currently own around 35-40 coins, half of which i bought before they were out in the market. My total investment is know worth 27k, and i have probably done hundreds if not thousands of trades both with losses and gains. I have been keeping track of my overall profit with a speadsheet and of the trades with Coinigy. And Im extremely confused about taxes. I havent converted anything back to fiat yet, but Im wondering if i am already considered a day trader and what the implications for my taxes are once i withdraw the money. Is there any software that you know of that can help me with this? Thanks in advance.
Depending on how many trades you made, you may not be conisdered a day trader. I would advise taking your records to an accountant who has experience with crypto for advice as this goes way beyond my knowledge of taxes.
What about if your friends or family gives you money and you buy crypto for them, then cash it in for them and give them all of the gains. Are you taxed for that, or, since the gains go to the friend or family member, is the tax paid by them?
I’m assuming you would be buying it with your own accounts. If that’s the case, you are the one being taxed on it. Now if they opened an account in their own names and you just happen to do the buying and selling on their behalf, then they get taxed.
That makes sense. Would it be possible to get them their own account and then send the crypto to that account and sell it under their name? or do they also have to be the ones who purchased it in the first place? I.e. I would buy it, make a couple trades and then transfer it to their account to convert back to fiat
In your example, you’re simply giving away cryptocurrency so it’s still a taxable event. Cryptocurrency is treated like a security e.g. stock as opposed to cash, so if you give it away, you’re disposing it at market value.
The only way you wouldn’t be taxed is if they opened up an account in their own name. They then gave you the login information and you made the trades in their account. Everything is done under their name so it’s taxable in their names.
However, keep in mind if this was a real brokerage and you were trading stocks, the brokerage would require legal documents signed to allow you to trade on their behalf. Crypto is a complicated thing, you should speak to an accountant.
If I give my bitcoin to my overseas family that is not Canadian, do I have to pay tax? Does it count as a gift?
A gift is not taxable, right? And how do they know I gave the bitcoin to my overseas family?
If I send the bitcoin from Canadian exchange to my hardware wallet, how do they know if I still have bitcoin or not? Even they ask the exchange to give them my transactions, how do they tell if I did sell my coins or not to international exchange like Binance or I sell it to local people?
Cryptocurrencies are considered a security so when you’re gifting them ‘in-kind’ you would be disposing them at its current value which in turn means you’d have to pay taxes. Since I don’t work for the CRA, I can’t explain how they would know, but not declaring capital gains is considered tax evasion.
The realization of Capital gains is only recognized as a taxable event by entities who are required to report such events upon conversion from Crypto to fiat, this can be avoided by peer to peer transactions where it is not encumbant upon the seller or receiver to report such transactions for the purposes of taxation. if Crypto for fiat transactions are completed on platforms that facilitate peer to peer buying and selling the seller will not realize a capital gain that is on a Ledger as the buyer is not required to report the transaction the seller is not implicated.
Do you know if transaction fees (mining fees) can be added to the commission when calculating the ACB?
For example if one buys bitcoin on coinbase, then moves it to Binance to trade to another coin. There is a coinbase fee when buying bitcoin and then the mining fee (transaction) to send to Binance, can the mining fee be added to coinbase’s buying commision fee in the ACB calculation?
I’m not an accountant, but adding your transaction fees to calculate your ACB sounds like the right thing to do.
Thanks for spreading the knowledge Barry! I’m the founder of TokenTax and we help people with exactly this issue. All you need to do is upload your transactions and out comes the report!
Check it out! https://tokentax.co
In Canada, when you want to sell units of a certain cryptocurrency you own, can you use FIFO, LIFO or an algorithm to choose the units of the cryptocurrency you want to sell in order to minimize capital gains? Or do you use an average cost of the total number of units of the cryptocurrency you own?
Generally speaking, you use an average cost. There’s no way to minimize a capital gain regardless if it’s a cryptocurrency or not. If you’re a heavy trader, I suggest speaking to an accountant.
Barry I agree with a lot of things you have said. How ever what you are saying about moving crypto from one wallet to another is a taxable event. Just simply is not true. That would be like saying that taking $100.00 CAD from my wallet in my pocket and putting it inside a book on my book shelf is a taxable event.
Good point, I’m going to modify the post to be more clear.
Barry thanks for all the posts. I am relatively new to crypto and I want to be sure I am doing all things legally and tracking it all for the CRA from the start. So here’s my question. I invest $1000 and make $3000. I decide to withdraw $1500 and’ reinvest’/keep the remaining $1500 . So I need to pay tax – 50% of my gain – I made $2000, So I pay tax on $1000. Correct? and then if I reinvest the remaining $1500 into another crypto, I need to log that trade, time ,market value, etc. But if keep it in the same currency and I never withdraw it then it’s not an event nor taxable. Do I have that right?
You got it. But note that you log the BOOK value when you reinvest, not the market value.
As long as you keep it in that current currency you purchased, there is no other taxable event. If you were to trade that crypto for another one, then it would be a taxable event.
Hi Barry, if I were to hold on to my cryptocurrencies and not sell it would I still have to declare capital gains on my taxes? Thank you in advance
Assuming you’re not trading it either, you would only pay capital gains or claim a capital loss when you sell.
Let’s say I made 2 bitcoin transactions to purchase alt coins on a different exchange would I have to report the 2 transactions that I made with bitcoin, I did not sell any cryptocurrency for fiat. Would I have to report these 2 transactions even though I haven’t sold anything or would I have to report everything I’ve bought also.
I’m assuming these are two separate transactions. You would only report when you sell (or trade it for something else).
I am curious as to what percent of taxes are required for every taxable event. For example if I buy $500 in bitcoin and use that bitcoin to buy another coin,that is a taxable event correct? So how much tax would I have to pay in this case. I guess what I am comparing it to is if I was to go to a store and buy a pair of pants this is a taxable event and I have to pay a set percentage of taxes for this transaction. I haven’t been able to find this information anywhere. Thanks in advance.
50% of your capital gain is taxable, but the amount of tax you actually pay depends on your marginal tax bracket.
So lets say you buy $1,000 in bitcoin to start. You then decide to buy another coin for $1,100 with your original coin you bought. That means the original coin would have gone up $100 in value and you’ve triggered a taxable event when you bought the next coin.
You would pay taxes on $50 based on your marginal tax rate.
Let’s say I bought 500 dollars worth of Bitcoin and used it to buy another coin, but the coin I bought lost 50 percent (currently investment worth $250) of its value, how would I declare this on my income tax. Thank you.
There are a few transactions in this situation.
You Bitcoin for $500. You then use that Bitcoin to buy another coin. Has the value of your original bitcoin gone up? If so, you need to calculate capital gains on that transaction.
You then sell the new coin at a 50% loss. You would report a capital loss of $250, but only if you actually sold the coin or traded it for something else.
Let’s say the value of bitcoin dropped since I bought it does that mean I only have to declare a capital loss on the bitcoin, and nothing on the other coin until I decide to sell
You only report the loss when you sell or trade it. If you’re still holding onto it, it’s just a paper loss.
I read your exchange of Micheal and I just want to make sure I understand…
I bought my first cryptocurrencies literally the day before the crypto market crash. It was rough.
I did some trading, but basically they were all losses.
So for example; If I bought $1000 value Bitcoin, I bought another coin AFTER value of my bitcoin already dropped to $900.
The coin I bought also continued to drop over the next few months…
I am also at a net loss when it comes to BTC value of my investments.(I don’t hold any Bitcoins, only altcoins)
So lets say if I bought 0.2 Bitcoin originally (just for example not accurate), and with that BTC I purchased some altcoins. Now I have coins worth in value to about 0.1 Bitcoin about 6 months later.
If I understand correctly; in cases like these, I just have to report my losses (when I sell or trade)?
As since I made no gains, I don’t I don’t owe any taxes to the government?
You would be able to claim a capital loss after you purchased altcoins (assuming you used the proceeds from the sale of your original bitcoin investment) since this is a taxable event. If you traded again, you could claim a capital loss or gain. You would not report any losses or gains based on the current value of your coins unless you sold.
Does that make sense?
Hi there! Thanks for the article.
What happens if I buy crypto and it goes to zero? Or I make a trade and lose? I have to assume that because you have to claim any gains that you can also write off losses….but it feels like that may not be the case.
You can claim a capital loss when you actually realize that loss. E.g. you claim the capital loss when you’ve sold or trade your crypto that has gone down in value. If you’re still holding the asset and it’s gone down, it’s just a paper loss which does not get reported.
Hi Barry. Thanks for sharing your knowledge.
I’ve purchased BTC a number of times throught the year – all in different quantities at different prices. I’ve been holding all of it, so no capital gains yet. Let’s say I decide to sell just once this tax year. Which buy price do I use to calculate the gains/losses? They were all different prices and some vary quite a bit. Should I just use an average of all my buy prices for the year?
You would indeed use your adjusted cost base (the average minus any fees) when reporting.
Good Luck with finding an accountant who has experience in cryptocurrencys. When you do find one they act as though they know the law regarding them but thats impossible because governments world wide are purposely making FUD Confusion Uncertainty and Doubt concerning cryptos. In Australia the ATO Australian Taxation Office is asking for all our information but then they state that they do not know how it will be handled and that they will sort it out later. Therefore with official declarations like that how can any accountant look at you with a straight face and say they know what they are doing. Unless its only for the benefit of who they serve.
We pay taxes on our money when we get paid for the majority of people that are good little slaves for the system. So why do we pay taxes on our money again and again. What if I transfer in and out of a cryptocurrency that is not even recognized as money several times then why should I pay taxes each and every time I do that. I am not a trader I just like cryptos because they represent truth and honesty.
Everyone please remember that wages tax was only brought in after the world wars which was propaganda to recover from the war effort but then was meant to be removed. It is still temporary, who knows with a looming world wide economic collapse coming next year. Just hold off from paying your taxes for now and maybe by next year you wont need to anymore when the corrupt monetary system as we know it will most likely collapse like a deck of useless cards.
Best advice wait until next year because it is possible that by then you wont need to do your accounting with the welfare nanny states or just put your assets into another identity then declare bankruptcy and enjoy your assets that are owned by shelf companys that are registered in Panama. Panama requires very little to obtain residency status there. Or just organize your business affairs via alternative countrys that are crypto friendly nations who will be the countrys that will prosper if you believe in cryptocurrencys like I do.
People who are struggling to figure out taxes on cryptocurrency likely won’t have any clue about setting up shell companies in a foreign country. Even if they do, it’s still tax evasion.
Its not Tax evasion if the taxes they normally pay are settled prior to the new business venture. At this point they could even get a new residency in a crypto friendly country and stop their original countrys residency and settle all taxs prior to their new crypto friendly countrys residency status.
That is a completely legal way to do it.
Barry how would crypto taxes apply when BITCOIN is the first world wide currency or when its the payment system used by most people.
So just because someone gets some Bitcoin to pay for something why should you pay taxation on your hard earned currency again. You should be allowed to spend your money however you choose, lets remember laws should be for the benefit of humanity. Not used against the people to cause misery and suffering
I have a question that I have been struggling to find an answer for.
When buying cryptocurrency do we have to hold it for at least a 366 days or more for the government to see it and tax it as capital gains ?
I’ve hear that if you buy crypto and hold it for less than 366 days (less than a year) it would be considered and taxed as an annual income not capital gains but the source is unreliable.
Could you clarify it, please ?
Thank you in advance
No such rules exist regarding how long the government sees and taxes. I suppose it’s possible that they may not “see” it, but if you don’t report it any gains in the current tax year, you’d basically be evading your taxes which is not worth the risk.
Holding it for less than a year and being taxed as annual income and not capital gains also makes no sense as you’d end up paying MORE tax as opposed to declaring it as capital gains where you’d only be taxed on 50% of those gains at your marginal rate.
Thank you for clarifying and taking the time to reply.
I’ve told my source that something felt fishy about his information.
I should be able to declare my crypto as capital gains regardless if I’ve held it for less or over a year and be taxed only in the 50% of the gains.
Again, thank you for clarifying
Are you sure GBTC is TFSA-eligible? It trades on the OTC market, and I don’t think that OTC securities are eligible for TFSA or RSP accounts.
Good catch, you’re right. Things that trade on the OTC would not qualify for your TFSA. I’ll make some edits now.
If I bought one bitcoin when it was $15000 in January 2018 and over the next few days in January I used all that bitcoin to buy 10 other currencies (so the value of the bitcoin was still 15000 at the time I traded for other currencies), and today the value is $4000 of the 10 currencies altogether…so I lost $11000 but I still have the currencies in my wallet…is that a capital loss or how does that work then?
It’s not a capital loss until you actually sell or trade your currency
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He traded the BTC worth $15,000 for 10 coins. Would that have been taxable?
Yes, but tax would only apply if there was capital gain or loss. E.g. if he bought the coins originally for $10K, but then traded for 10 coins at a value of $15K, there would have been a capital gain of $5K.
“If you’re a high volume trader e.g. someone who holds cryptocurrencies for a short period of time or day trades them, the CRA may consider it a business.”
Is there a way to find out the exact criteria for this so that I know if my trading frequency will be regarded as business? Or is it really a case-by-case issue and I won’t be able to find out until CRA contacts me? I can see a few criteria about this on CRA website, but there’s no definitive answer to it.
It’s really a case-by-case basis. The CRA can be a bit vague when it comes to day trading and crypto.
I have read through all of your comments. I can’t believe that you have answered ongoing questions for a almost a year. But thank you as this is a very new phenomena. I truely appreciate your efforts.
I haven’t seen an answer for this yet. I purchased a very expensive video card (over $1300) and used my personal computer, hydro, etc. to churn out altcoins that I then used to buy Etherium coins. When the time comes for me to sell that Eth coin, how do I determine any gains (assuming there is any)? I never actually paid for anything. My computer ‘generated’ coins. Can I deduct what the video card cost from what the Ethereum is worth at the time that I cash it out? How do I equate for the cost of hydro, where on my PC, etc. This was a hobby simply because I found it fascinating. That Etherium is worth something now…but my guess is that when all is said and done, I lost money.
To be perfectly honest, I’m not sure. I imagine that you would have to log the value of the altcoins when they were mined. If those coins went up in value when you bought your Etherium coin, that would be a taxable event. When you sell your Etherium, you would base the capital gains or losses on when you acquired it.
It’s a bust at this point anyway. Especially since I lost it all on QuadrigaCX
When do I submit my capital gains/loss on my taxes if I have not withdrawn any fiat? I have bought/traded crypto through 2017/2018 but never withdrawn any of it besides sending from wallet to exchange
You pay taxes for the year which a taxable event occurred. If you had a capital gain/loss from a trade in 2018, then you report it in that year.
It doesn’t matter if you didn’t withdraw the money, it’s still a taxable event. The same tax rules would apply if you were switching mutual funds.
First off I want to thank you for continuing to answer questions this long after the original article.
Say you bought bitcoin several times throughout 2018 for the purpose of immediately buying another coin/token to hold. Since the transfer was practically immediate, would that even be considered a taxable event?
It would be a taxable event, but if the value of the coin didn’t go up or down before you bought next coin/token there would be no capital gains / losses to report.
The capital gain/loss part is what I meant, should’ve said. Thanks for the clarification.
i have 1 bitcoin i want send it to an exchange & trade it like bussines and make 2 bitcoin & withdrawl as bitcoin & hold it
if i dont sell Includes taxes ?
When you trade the coin and withdraw it, those are taxable events even if you don’t cash out.
So, i have to report capital gain for 1 or 2 BTC and pay tax for it. Then, i decide to deposit them to an exchange and sell for CAD, later, transfer cad to my bank account and buy something. I think this is the income or capital gains or whatever. We have to report and pay tax for it. Whatever you bought with that money like a car or milk, pay tax for it. I think this is the real blockchain, not the one that everybody knows.
First off, thanks for all the replies Barry!
Crypto taxes are currently super overwhelming, I am grateful for people like you helping all of us!
I have a few questions
1) Is it possible to redo incorrectly done taxes from previous years? If so what is the punishment for this? My previous accountant believed there was no capital gains or losses until cashing out.
2) Capital gains are 50% and then your regular tax rate? So if I bought 1 BTC for 5k and sold at 20k, I would have 15k profit. 7.5k capital gains, which would be taxed at my regular tax rate? My small business has a tax rate of 12% or something. so rougly $900 in taxes. Is that correct?
I have reached out to a new CPA that specializes in crypto and have an appointment next week, but in the meantime I am still feeling stressed and overwhelmed by the whole thing.
3) Due to #1, I may not have records of every transaction, but could probably piece it together. How big of an issue is this? If you get audited, do they go through everything 1 by 1 or do the just ask for proof of specific things?
Hey John Smith,
If you have a meeting with an accountant scheduled who specializes in crypto, you’re in good hands. It’s better to get everything corrected now. If you are audited, you would need some kind of paper trail, but it really depends on what they’re asking for during an audit.
E.g. I was once audited about medical expenses. I provided the proof just about the expenses and the case was closed.
Barry, I just read most of the comments here. You are a very patient man. I learned a lot and applaud you for doing this. Makes sense to me most of it.
What if someone lives in Canada and is a dual citizen, opens a LLC in the other country and the LLC owns the cryptocurrency and the person who is an agent of the LLC trades on behalf of the overseas LLC?
I am all confused. Lets say I buy 0.5 BTC at $3000 CAD. Then I trade it for another coin, let say NEO…. Everything is in sat…. In 3 month period I sell all my NEO’s and make 2 BTC 3 month later I sell all my BTC at a price of $20,000 CAD.
So my question would be: what should I declare for my taxes!???
1.-When I sell my BTC and turned it into fiat.
2.- Every transactions?
*BTC – NEO * NEO BTC
Am I paying more taxes that way with #2 ?
PS. And I am not included if I convert any coins to stablecoins back and fourth and make at least 200 transactions every 3 month.
In my opinion would be that crypto should be taxable if you convert into fiat, buy properties or other services…. Also crypto is not regulated that is why a lot of people don’t agree that crypto should be taxable. If you know what I mean.
You’re taxed on every transaction as each is a taxable event.
How you think crypto should be taxed differs from what the CRA thinks.
People buy and sell stocks all the time and even though they don’t convert to actual cash, each sell is still a taxable event. Why would it be different for crypto?
Sure a lot of people don’t agree how crypto should be taxed, but people also don’t agree with how income taxes work. You can choose not to report your capital gains and losses, but that’s tax evasion.
Hey I have another scenario I’m a bit confused on.
Let’s assume btc is $5000 for simplicity’s sake.
Bob buys $1000 of btc and immediately exchanges it for xyz coin. 3 months later xyz coin has gone up 3x vs btc and Bob sells it back into btc. So Bob started with 0.2 btc but after the transfer he has 0.6 btc. He reports the capital gain in the following year and later he sells his btc for Fiat. Would he be taxed again on the entire 0.6 btc or since the 3x gain was accounted for the previous year would the gain on the original 0.2 be the only portion taxed?
Every event you listed is taxable. Bob would be taxed on 0.6. The original 0.2 no longer existed after he traded to XYZ coin.
So moving coins around (trading, no matter how little) effectively means you can be taxed multiple times on the same balance.
It’s not the same balance when you’ve traded it for something else.
I hold mutual fund X, I then trade it for Y, which I then trade for Z. I then trade Z for 3 of Mutual fund X.
Each event is taxable as I’ve disposed of the asset, but just because I’m back to the original asset doesn’t mean it’s no longer taxable.
What I invested and lost 80% of my money, I haven’t sold, I just let the rest sit there?
If you haven’t sold or traded your crypto then it’s just a paper loss so there’s nothing to report.
I receive a disability check here in BC.
I have been investing a fairly large portion of my check each month into Bitcoin…
When I go to sell it for Cold Hard Canadian Cash, how will this work?
also, since it came from my disability check will I have to repay back a large amount of what I have made to the government?
How much would I pay in taxes?
Each time you trade or sell, it’s a taxable event so you’d need to calculate your capital gains/losses accordingly.
I’m not familiar with disability cheques, so I don’t know how that’s taxed.
What you pay overall in tax depends on your income bracket.
Hi Barry thx for all your patience and replies:
I have 2 questions :
1) What about my trades in QUADRIGA CX (It is closed now- I think owner passed away). ? and I do not have any records with me….
2) What about SHAPESHIFT records?
It is decentralized exchange which does not provide any records after the transaction is done.and I used it few times but have no records….
How to report those transactions on these 2 exchanges? I m feeling totally helpless- I had no idea to keep records when doing the transactions.
You’ll need some kind of documentation to log your capital gains and losses for taxes. If you don’t have anything, you may want to speak to an accountant for advice.
Say you buy in Canada but move country? Some countries are tax free for crypto, the likes of Portugal, Germany, Slovenia, Singapore etc and if you make a life changing amount it would be worth considering your options.
You’re taxed based on the year which the taxable event happened. I suppose if you made a life changing amount in the first quarter of the year and then you immediately moved and cut all ties to Canada, you might be able to get your capital gains tax free. But I’m sure the CRA has accounted for that too.
This is an enlightening thread and I’m very thankful you have been maintaining this comments section so diligently.
My question pertains to withdrawing from an ALT coin back to FIAT and the steps I need to take to get there, if I chose to buy an ALT coin, my usual steps would be 1.) fund an exchange, 2.) buy BTC, 3.) buy the alt coin. Then if I want to take profits and cash out to CAD$ I would 1.) sell to BTC, 2.) transfer to my local exchange, 3.) sell BTC to CAD$. 4.) transfer to my Bank.
The time frames for these transactions would be happening quickly, so in the purchasing process I’d acquire BTC and buy my alts, the price difference between when I bought BTC and traded to an ALT wouldn’t have changed much but I believe this would be a taxable event, so how much do I get taxed here ? Is the taxable gain / loss worked out on the fluctuation in price between the BTC and the ALT ? If so this would only be a small amount correct ?
The same concern surrounds cashing out, Say I buy 1k worth of BTC then immediately use that 1k of BTC to buy RIPPLE, then 1 year later the RIPPLE is worth 5k, so I sell the RIPPLE to BTC which would mean I pay gains of $2k ((50% of 4k profit) … then I want to transfer the BTC to my local exchange and Sell the BTC for CAD$ .. because the BTC to CAD transaction would happen on the same day there shouldn’t be much price fluctuation but there is a transaction there, so how much tax to I pay there ? I have already paid gains on the RIPPLE profits selling to BTC. Do I only calculate taxable gains / losses going from BTC to CAD for the values that fluctuated between the 2 currencies ? Or am I having to pay capital gains on the 4k RIPPLE profits again ?