When Do You Need to Report Cryptocurrency?
You must report cryptocurrency if you:
Sell or Trade: Disposing of cryptocurrency for cash or exchanging it for another cryptocurrency triggers a taxable event.
Use Crypto for Purchases: Paying for goods or services with cryptocurrency is considered a disposition.
Mine Cryptocurrency: Income from mining may be considered business income or taxable benefits.
Earn Cryptocurrency: Receiving crypto as payment for work or services is considered income.
How to Report Cryptocurrency Transactions
1. Determine the Nature of Your Transactions
Capital Gains: If you trade or sell cryptocurrency as an investment, report capital gains or losses.
Business Income: If you engage in frequent crypto trading, mining, or accept crypto for services, it may be classified as business income.
2. Calculate Gains or Losses
Adjusted Cost Base (ACB): Calculate the original purchase price of your cryptocurrency, including any fees.
Proceeds of Disposition: Determine the value of the crypto when sold, traded, or used for purchases.
Capital Gain/Loss Formula:
(ProceedsofDisposition)−(AdjustedCostBase+TransactionFees)=CapitalGain/Loss(Proceeds of Disposition) - (Adjusted Cost Base + Transaction Fees) = Capital Gain/Loss(ProceedsofDisposition)−(AdjustedCostBase+TransactionFees)=CapitalGain/Loss
3. Record All Transactions
Keep a detailed log of each transaction, including:
Date of the transaction
Type of cryptocurrency involved
Value in CAD at the time of the transaction
Transaction fees
4. Report on Your Tax Return
Capital Gains: Report 50% of your net gains on Schedule 3 under Capital Gains (Line 12700).
Business Income: Report the total income on Form T2125 (Statement of Business or Professional Activities).
Using CloudTax to Report Cryptocurrency
Connect Your Crypto Records: Use tools like Koinly or manually input your transaction data into CloudTax.
Import Capital Gains: If using a crypto tracker, integrate your transaction report directly.
Select the Correct Tax Form: Choose between capital gains or business income depending on the nature of your crypto activity.
Review and File: Ensure all amounts are accurate and submit your return electronically through NETFILE.
Important Notes
The CRA requires detailed records for all crypto transactions. Keep this data for at least six years.
Converting one cryptocurrency to another is taxable, not just selling for cash.
Failing to report cryptocurrency activity can result in penalties or audits.
Why This Matters
Accurately reporting cryptocurrency ensures you remain compliant with CRA rules while avoiding penalties. Proper tracking and classification of your transactions also help you maximize deductions and minimize taxable income.