Crypto and Taxes: Basic Guide for Beginner Crypto Investors
The Canada Revenue Agency (CRA) classifies cryptocurrency as property.
Canadians who invest in cryptocurrencies need to be aware of the tax implications of these investments. For instance,
Canadians who invest in cryptocurrencies need to be aware of the tax implications of these investments. For instance, any time you sell or exchange crypto, the CRA considers it a taxable event. This includes using crypto used to pay for goods or services. To prevent misfiling penalties, interest, or fees, here are a few key crypto and tax details to keep in mind:
When do you need to report crypto transactions on your tax return?
As a digital asset, the CRA wants to get its share of any earnings from cryptocurrency transactions. As a result, investors need to report crypto after any of the following occurs:
- When you sell or gift cryptocurrency.
- When you trade or exchange cryptocurrency (i.e. exchange equivalent amount Bitcoin for Ethereum)
- When you convert cryptocurrency to any other currency issued by a central bank (i.e. Canadian dollar)
- When you buy goods and services using cryptocurrency
What happens if you don’t report cryptocurrency on your taxes?
Cryptocurrencies are considered property for tax purposes in Canada. This means that any gains or losses from buying or selling cryptocurrency are subject to capital gains tax. Fail to report these transactions and the CRA will consider it a failure to report earnings; you will owe interest on the taxes owed and could be hit with a penalty or fine.
What is the crypto tax rate?
As a digital asset, crypto earnings and transactions are taxed using capital gains tax.
Capital gains are calculated as the difference between the cost of acquiring the cryptocurrency and the proceeds from selling it (minus the adjusted cost base, which are the costs of acquiring and selling the digital asset).
For that reason, it’s important to keep detailed records of all cryptocurrency transactions, including the date, value, and purpose of the transaction. This will help you accurately calculate your capital gains or losses and report them on your tax return.
Do you have to pay taxes on crypto if obtained as payment?
If you receive cryptocurrency as payment for goods or services, the value of the cryptocurrency at the time of the transaction is considered income for tax purposes.
Do you have to pay taxes on mined crypto?
If you mine cryptocurrencies as a business, the value of the cryptocurrency at the time it is mined is considered income for tax purposes.
Bottom Line
The CRA has been actively pursuing tax evasion related to cryptocurrency investments. If you fail to report your cryptocurrency gains or income, you could be subject to penalties and interest charges.
It is a good idea to consult with a tax professional if you have any questions or concerns about the tax implications of your cryptocurrency investments. They can help ensure that you are accurately reporting your gains and losses and staying compliant with CRA regulations.
