In Canada, cryptocurrency-related income is classified as either a capital gain or business income. 50% of the capital gain from cryptocurrency investing is taxable. For instance, if you bought Bitcoin for $10,000 and sold it for $15,000, taxes would apply on $2,500 of your profit. However, 100% of the business income from cryptocurrency is taxable. The more active you are as a trader and the higher your profits, the more likely your crypto profits will be considered business income.
Capital gains from cryptocurrency investing are subject to the same tax rates as the federal income tax and the provincial income tax. Taxable events for crypto investors include selling cryptocurrency for fiat currency, trading a cryptocurrency for another, using cryptocurrency to purchase goods and services, gifting cryptocurrency, and receiving rewards through cryptocurrency mining or staking. Non-taxable events include buying cryptocurrency with fiat currency and holding it, receiving a gift in the form of cryptocurrency, transferring cryptocurrency between two of your own crypto wallets, and creating a DAO.
Cryptocurrency tax reporting can be simplified by using dedicated cryptocurrency tax software. Losses from crypto can be offset in Canada, with half of your capital losses from crypto deductible against your taxable capital gain. However, capital losses cannot be deducted against other forms of income. If your capital losses exceed your capital gains in a year, the difference can be applied against your capital gains for other years. You can carry net capital losses forward indefinitely or carry them back for a period of three years.
Cryptocurrency exchanges in Canada are required to report all transactions above $10,000 to the CRA. Exchanges are also required to keep information about transactions under $10,000, and disclose the information to authorities if requested to do so. Therefore, it is advisable to assume that the CRA is aware of all your cryptocurrency activity and report your crypto transactions accordingly.