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How Is Crypto Taxed in Canada?

How Is Crypto Taxed in Canada?

A 2022 report estimated that 1.2 million Canadians owned at least some cryptocurrency. Depending on how you hold your crypto (and how it performs), you may be subject to income tax when you dispose of it. But how is crypto taxed in Canada, and can you avoid paying tax? Keep reading to find out.

Is Crypto Taxed in Canada?

The short answer is yes; when you dispose of cryptocurrency in Canada, any gains you’ve realized become taxable, according to the Income Tax Act.

Will I be Taxed When I Buy Crypto?

There are no tax implications for purchasing or holding cryptocurrency. Only when you decide to dispose of crypto will you be required to pay income tax. Here are some examples of transactions that may trigger income tax:

  • Sale of cryptocurrency
  • Gifting cryptocurrency
  • Using your crypto to purchase goods and services
  • Exchanging crypto for a different type of crypto
  • Converting your crypto to fiat currency, e.g., Canadian or US Dollars

The CRA considers crypto a commodity and taxes it in one of two ways: as business income or as a capital gain. Let’s take a look at each taxation method.

Business Income Tax

If CRA determines that you’re attempting to trade crypto for business purposes, they may decide to tax your crypto earnings as business income. While they make these decisions on a case-by-case basis, there are things they look for. Are you trading frequently? Are you promoting a product or service? These are questions the CRA will seek to answer.

If your crypto earnings are taxed as business income, you must report 100% of your income on your return and pay tax at your regular tax rate.

Capital Gains

If the CRA decides that your crypto earnings should be taxed as capital gains, you must report 50% of your capital gain on your income tax return.

How Does Capital Gains Tax Work in Canada?

A capital gain (or loss) is triggered when you dispose of cryptocurrency. Capital gains on crypto transactions are taxed like for other investments, such as stocks or exchange-traded funds (ETFs).

In Canada, only 50% of a capital gain is taxed. If you receive a capital gain, you must include the amount and any employment income (or other taxable income) and pay tax at your marginal rate. As mentioned, a capital gain is only incurred when you dispose of an investment – simply holding the crypto, stocks, or ETFs in your account doesn’t trigger a capital gain.

Taxable capital gains can be offset by capital losses, which reduces your taxable income and the tax you pay.

For example, if you sold a cryptocurrency for a $10,000 capital gain in 2022, your taxable income would be $5000 (50% of $10,000). However, if you had another cryptocurrency that had dropped in value by $8000, you could sell it and report it as an allowable capital loss of $4000. (50% of $8,000). The $4000 loss would reduce your capital gain to $1000 ($5000-$4000). Instead of being taxed $5000, you would now only be taxed on $1000, resulting in significant savings.

At What Rate is Crypto Taxed in Canada?

There is no specific income tax rate for crypto investments in Canada. Every Canadian who realizes a capital gain on a cryptocurrency investment must report it as income and pay tax at the regular federal and provincial income tax rates. Here is a breakdown of the federal income tax rates for the 2022 tax year:

2023 Federal Income Tax Tiers (Canada)

  • 15% up to $53,359 of taxable income.
  • 20.5% from $53,359 to $106,717.
  • 26% from $106,717 to $165,430.
  • 29% from $165,430 to $235,675.
  • 33% on taxable income exceeding $235,675

Provincial tax brackets vary by province. You can find the 2023 income tax rate for your province here.

How Does the CRA Track Crypto Investments?

Because most cryptocurrencies are decentralized, some people believe that the government can’t track their crypto transactions; thus, they can avoid paying taxes by not reporting. That is not the case.

Any cryptocurrency exchange in Canada must report transactions greater than $10,000 to the Canada Revenue Agency. For example, if you have an account with Bitbuy and sell $15,000 worth of Bitcoin, Bitbuy must report that transaction to the CRA.

Canada’s top cryptocurrency exchanges are registered with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC). FINTRAC ensures that financial institutions, including crypto exchanges, adhere to Canada’s strict anti-money laundering regulations.

In addition to your crypto transactions, FINTRAC can access your crypto wallet addresses and your identification.

What Penalties Are There if I Don’t Pay Taxes on My Crypto Investments?

The CRA considers not reporting your crypto income tax evasion, which is treated very seriously. You could be subject to significant fines and penalties if you choose not to report the income from your crypto investments.

How to Avoid Paying Tax on My Crypto Investments

Here are a few tips to help you reduce the tax you pay on crypto:

1. Don’t Sell Your Crypto

The easiest way to avoid paying income tax on cryptocurrency is to hold onto it. Because income is only triggered when you dispose of your crypto, you can defer your gains to future tax years by not selling.

2. Donate Your Crypto to Charity

You can choose to donate your crypto to charity in exchange for a charitable donation receipt which you can use to reduce your taxable income. There are strict rules with donating investments like crypto, including how fair market value is determined, so make sure you understand how they will apply to your situation. Of course, donating crypto means that you no longer own the asset, but it may make sense to use crypto instead of money from other sources as a donation.

3. Offset Your Capital Gains with Capital Losses

By trading cryptocurrency at opportune times, you can avoid paying taxes on the sale of crypto. In the example I used earlier, a $5000 capital gain on one crypto investment was reduced to $1000 of taxable income by reporting a $4000 allowable capital loss on a separate crypto investment. There are some rules for reporting capital gains and losses, so make sure you speak with a tax professional before attempting to sell crypto to report a capital loss.

4. Purchase a Bitcoin ETF in an RRSP

With the launch of the first Bitcoin ETF in Canada in 2021, it became possible for Canadian investors to hold Bitcoin in their Registered Retirement Savings Plans (RRSPs). Because RRSPs are tax-sheltered, you won’t pay taxes on any income earned. At least, not until you withdraw money from your RRSP when you retire. But until then, you can hold crypto in your RRSP without tax consequences.

5. Purchase a Bitcoin ETF in a TFSA

You can also purchase Bitcoin (or Ethereum) ETFs inside your Tax-Free Savings Account (TFSA). Like RRSPs, Tax-Free Savings Accounts are tax-sheltered, so any income you earn won’t be taxed. The beauty of the TFSA is that you also don’t pay tax when you withdraw money from your account.

Where Should I Invest My Crypto?

If you’re thinking about buying crypto and are wondering where to start, I recommend opening an account with a cryptocurrency exchange. Our top pick at MapleMoney is Bitbuy, but Coinsmart or Wealthsimple Crypto are also excellent choices.

Cryptocurrency exchanges make buying and selling dozens, even hundreds of different coins easy. You will pay fees, but they are usually pretty reasonable. As mentioned earlier, crypto exchanges are required to report your activity to the CRA, so you will need to report any income you earn.

Final Thoughts on Cryptocurrency Taxes

When it comes to income tax reporting, it’s best to view your crypto holdings the same way you would your stocks or bonds. Unless your crypto is being held inside an RRSP or TFSA account, expect to pay income tax when you sell your coins. The good news is that capital gains income is more tax efficient than interest income. Just remember that if your cryptocurrency transactions are considered business income by the CRA, you will have to pay tax on your entire disposition. 


  1. Bill Edwards

    So, to be clear. Crypto is not legal tender in Canada, is not government regulated however it is legal to tax crypto? How hypocritical of our blood sucking CRA!

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