Canadian Tax Guide for Crypto and Stocks

How trades are taxed

The CRA treats cryptocurrency as a commodity, not as money. Selling or trading it, like selling a stock, is a disposition of property. A disposition produces a gain or a loss:

Gain or loss = proceeds of disposition − adjusted cost base − selling costs

That gain is taxed in one of two ways:

• Capital gain. This is the usual case for an investor. Half of the gain (the inclusion rate) is added to your income and taxed at your marginal rate.
• Business income. If your trading looks like a business (frequent short-term trades, a lot of time spent, borrowed money, or holding yourself out as a trader), the CRA can treat the whole gain as income. Losses are then fully deductible too.

Which one applies depends on your facts. Most long-term holders report capital gains.

What counts as a disposition

Crypto-to-crypto trades catch many people out. Swapping ETH for SOL is a sale of ETH at its fair market value in Canadian dollars at that moment, even though no dollars changed hands.

Adjusted cost base

Your adjusted cost base (ACB) is what you paid for a property, including commissions and trading fees. Canada uses the average cost method for identical properties: every unit of the same coin or share you hold in your taxable accounts is pooled, and each one carries the average cost of the pool. You can't pick specific lots as you can in the US.

Pooling applies across all your non-registered accounts at every broker and exchange, not separately per account. Shares held inside a TFSA or RRSP are outside the pool.

US dollar trades

Everything is reported in Canadian dollars. Convert each purchase at the exchange rate on the day you bought, and each sale at the rate on the day you sold. The Bank of Canada's daily rate is the accepted source. Converting both sides at the same rate is a common mistake: the currency's move between purchase and sale is part of your gain or loss.

Superficial loss rule

You can't claim a capital loss if you, or a person affiliated with you (such as your spouse or a corporation you control), buy the same property within 30 days before or after the sale and still hold it 30 days after the sale. The denied loss isn't lost: it is added to the ACB of the shares or coins you bought back, so you get it back when you eventually sell those.

Buying the same security back inside your own TFSA or RRSP within the window also triggers the rule, and the denied loss can't be added to a registered account's cost, so it is gone for good.

Staking, mining and dividends

• Staking and mining rewards are generally taxed as income when you receive them, at their fair market value in Canadian dollars. That value becomes their cost base, so you are not taxed on it again when you sell.
• Airdrops depend on the circumstances. Tokens received for doing something (providing a service or liquidity, for example) are generally income. Get advice on unsolicited airdrops.
• Canadian dividends are grossed up and earn the dividend tax credit; your broker reports them on a T5.
• US dividends are fully taxable as income. The US usually withholds 15% (with a W-8BEN on file), and you can generally claim a foreign tax credit for it in a taxable account. Inside an RRSP, US-listed shares are exempt from that withholding; inside a TFSA they are not, and the 15% can't be recovered.

TFSA and RRSP

Gains, losses and income inside a TFSA or RRSP are not reported on your return. Withdrawals from an RRSP are taxed as income; TFSA withdrawals are tax-free. You can't hold cryptocurrency directly in these accounts, but you can hold crypto ETFs listed on a Canadian exchange.

Two cautions. Losses inside a registered account can never be claimed. And frequent day-trading inside a TFSA can be treated as carrying on a business, which makes the gains taxable.

Using capital losses

Capital losses first offset capital gains in the same year. Losses left over become net capital losses, which you can carry back up to three years (using Form T1A) to recover tax already paid, or carry forward indefinitely. They can only be used against taxable capital gains, not against salary or other income.

Forms and deadlines

Schedule 3

Where you report capital gains and losses from the year's dispositions. The taxable amount flows to line 12700 of your T1 return.

T5008

The slip Canadian brokers issue for securities you sold. It shows proceeds but often has a missing or wrong cost, especially for shares transferred in from another broker. The CRA receives a copy, so your Schedule 3 should reconcile to it. Crypto platforms generally don't issue T5008s, so you work from your own records.

T1135

Required if the total cost of your specified foreign property was over $100,000 at any time in the year. US shares count even when held at a Canadian broker in a taxable account. Whether a given crypto holding counts depends on how and where it is held; check with a professional if you are near the threshold.

Deadline

April 30 for most people. If you or your spouse are self-employed, filing is due June 15, but any balance owing is still due April 30.

Keeping records

Keep records of every transaction: date, type, quantity, price, fees, the exchange rate used, and wallet or account. The CRA expects records to be kept for six years from the end of the tax year they relate to. Export your exchange and broker histories regularly, because platforms close and accounts get deleted.

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