Navigating Crypto Taxes in Canada: What You Need to Know This Season

A quick note before we start… Coinbase doesn’t provide tax advice. This article is based on the CRA’s current guidance, which may change over time. None of this should be considered as individualized tax advice. Please consult a tax professional to determine what applies to your specific situation.

What's NOT Taxable in Canada

Good news first, not everything crypto-related triggers a tax event.

• Buying and holding: Purchasing crypto with Canadian dollars and simply holding it isn't taxable.

• Self-transfers: Moving your Bitcoin between your own wallets doesn't trigger taxes either. Your original purchase price and acquisition date stay the same.

Taxable as Capital Gains

Here's where the CRA takes interest:

• Selling crypto for cash: Converting your crypto back to Canadian dollars at a profit creates a capital gain. 50% of capital gains are taxable in Canada.

• Crypto-to-crypto exchanges: Swapping one cryptocurrency for another (like trading Bitcoin for Ethereum) is considered taxable, even if no Canadian dollars are involved.

• Spending crypto on goods or services: Bought your coffee with Bitcoin? That's a taxable transaction too.

Taxable as Income

Some activities are fully taxable at your normal income tax rate:

• Mining rewards: The value of cryptocurrency you mine counts as income when received.

• Getting paid in crypto: If your employer or clients pay you in Bitcoin, that's taxable income at fair market value.

• Staking rewards: Those extra tokens you earn from staking are considered income when received.

• Airdrops and promotions: Free crypto from airdrops, promotions, or referrals is generally considered taxable income.

Business or Hobby? It Makes a Big Difference

The CRA looks at several factors to determine if your crypto activity is business income (fully taxable) or capital gains (only 50% taxable):

• How frequently you trade

• How quickly you sell after buying

• Your knowledge of crypto markets

• Time spent on crypto activities

• Use of debt to finance purchases

• Whether you advertise crypto services

For most casual investors, profits typically qualify for the more favourable capital gains treatment.

Helpful Resources

Crypto users can take advantage of tools like Crypto Tax Calculator, a trusted Coinbase partner, to simplify tax season and stay compliant with CRA requirements.

Simply copy and paste your public wallet address into the app, and it will automatically import your transaction history. From there, you can categorize different types of transactions to ensure everything aligns with CRA rules and guidelines.

Your Tax Season Checklist

Before filing your taxes, make sure you:

• Gather records of all crypto transactions from the past year

• Determine which activities were capital gains vs. income

• Calculate your adjusted cost base for all disposed assets

• Generate reports from exchanges like Coinbase

• Consider consulting with a tax professional who understands cryptocurrency

Understanding your crypto tax obligations in Canada doesn't have to be overwhelming. With proper planning and record-keeping, you can confidently navigate tax season even with an active crypto portfolio.