How to file Bitcoin taxes in Canada

Tax time is fast approaching, and if you’ve had any bitcoin and other cryptocurrency gains or losses within the year, you may have a few questions about how to report them in your returns. The good news is that the Canada Revenue Agency (CRA) has clear guidelines on the tax treatment of cryptocurrency transactions and digital assets. In fact, Canada’s taxation system for cryptocurrencies is more developed compared to many other countries.

However, with cryptocurrencies being a relatively new technology, tax rules are still evolving in Canada as much as in any other country. If you’ve been involved in cryptocurrency mining, investing, trading, or staking, you will want to keep tabs on the latest tax requirements as per the CRA. This ultimate guide provides you with essential information about how to pay taxes on bitcoin and other cryptocurrencies in Canada.

Disclaimer: Please note that this article is strictly for information purposes and does not, by any means, constitute professional tax, trading, investment, financial or legal advice. If in doubt about your tax obligations, consider consulting a qualified tax professional.

Do you have to report Bitcoin on taxes in Canada?

Yes, cryptocurrency is taxable in Canada. This is because the Canada Revenue Agency (CRA) treats all digital currencies – including cryptocurrencies like Bitcoin, Bitcoin Cash, Ethereum, Tether, and BNB – as commodities that are equivalent to assets rather than legal tender. As such, they are subject to the Canadian Income Tax Act just like any other investment property (like stocks, for example). Therefore, any transactions involving such currencies are not exempt from the CRA’s tax obligations.

As a cryptocurrency holder, you are legally required to keep track of all the transactions involving your coins and tokens. Further, it’s your obligation to calculate the value of each transaction in Canadian dollars and ultimately report any gains or losses in your tax returns either as business income or capital gains, depending on the nature of the transaction (more on this shortly).

When keeping records of transactions, you will want to include any expenses incurred in the process. These include costs of software, hardware, exchange fees, and other related costs (like gas fees) for making the transaction on a network. Since Canada uses the adjusted cost basis method of taxation, you may deduct all eligible cryptocurrency expenses when preparing your tax returns. This is good news for Bitcoin and other cryptocurrency holders and traders because expenses involving fiat currency are not always deductible. In fact, while it’s beneficial to keep detailed records of cryptocurrency transactions for the sake of deductions, you may not always need to have an extensive record of fiat currency transactions.

With that in mind, you may be wondering which cryptocurrency activities are taxable in Canada. Generally, a transaction is subject to tax if it involves:

• Earnings from mining activity and staking of cryptocurrencies
• Selling cryptocurrencies for fiat currency like the Canadian dollar
• Using cryptocurrencies to pay for goods or services
• Giving cryptocurrencies as a gift
• A cryptocurrency barter transaction, i.e., trading cryptocurrency for cryptocurrency, like selling one coin for another
• Any other activity that results in you disposing of your cryptocurrency

In Canada, there is no tax obligation for simply holding bitcoin and any other cryptocurrency. You will only be required to pay tax when you dispose of it for another cryptocurrency or fiat currency like the Canadian dollar.