When Do You Need to Report Cryptocurrency?
You need to report cryptocurrency if you:
Sell or Trade Cryptocurrency: Disposing of cryptocurrency for cash or trading it for another cryptocurrency is a taxable event.
Use Cryptocurrency to Pay for Goods or Services: This is treated as a disposition and must be reported.
Mine Cryptocurrency: The CRA may consider mining income as taxable business income or self-employment income.
Receive Cryptocurrency as Payment: Receiving crypto in exchange for services or goods must be reported as income at its fair market value (in CAD) at the time of receipt.
Why Reporting Cryptocurrency is Important
Avoid Penalties: Failing to report crypto activity can lead to penalties, interest, or even audits by the CRA.
Ensure Compliance: The CRA tracks cryptocurrency transactions, including those from major exchanges, and expects accurate reporting.
Claim Deductions: Proper reporting allows you to claim eligible deductions, such as transaction fees or mining-related expenses.
Tax Classification of Cryptocurrency
Capital Gains: If you sell or trade cryptocurrency as an investment, the profits are considered capital gains, and 50% of the gain is taxable.
Business Income: If your crypto activity is frequent or part of a business, the CRA may classify it as business income, which is fully taxable.
Records to Keep
The CRA requires you to maintain detailed records of all cryptocurrency transactions, including:
Dates of transactions
Type and quantity of cryptocurrency
Fair market value (in CAD) at the time of each transaction
Transaction fees
Purpose of the transaction (e.g., sale, trade, payment, mining)
Why This Matters
Reporting cryptocurrency ensures you comply with CRA regulations, avoid penalties, and accurately calculate your taxable income.