In Canada, cryptocurrency is a commodity as per the Canada Revenue Agency (CRA). Compared to the U.S., where crypto is more broadly treated as an asset, CRA does not technically see it as money or a legal tender. As cryptocurrency grows in popularity, the question on many trader’s minds remains: how do I go about filing my crypto currency earnings for the year?
We at Coinberry have created a short introductory guide for traders with questions about filing, and what methods to use when calculating earnings.
According to the CRA, any profits or earnings made from crypto trades must be treated as either a business income or capital gain. Of course, this depends on how much you’ve actually made trading, whether you’re choosing to operate similarly to an actual business or as a “here and there hobby”.
Generally, those who are heavily involved in crypto trading––like day traders or high volume traders where most of their income is made through trading–– might consider filing their earnings as a business. Those who made a profit from buying and selling cryptocurrency, but are doing it on an infrequent, ad hoc basis, might consider filing their earnings as capital gains. These two different forms of earnings are taxed quite differently.
- For profits earned as capital gains, only 50% of these profits are actually taxable.
- For profits earned as business income, 100% of these profits are taxable.
You realize a profit or a loss (either business income/loss or capital gain/loss), as soon as you dispose of the crypto you are holding. The disposition is triggered either by exchanging one crypto currency for another, or by disposing of crypto currency entirely and converting it into CAD.
Any time you sell/dispose of your cryptocurrency, you must keep a record of it. (You can now download your Coinberry account activity from your dashboard) It can be especially tricky to remember both the Fair Market Value and Adjusted Cost Base at the time it was traded – both concepts critical to properly calculating resulting profits and/or losses. Calculating these metrics can pose a unique challenge for Canadian crypto traders, but if your trade activity information is stored on your favourite trading platform, all the relevant values should be readily available. The calculation process will be, most likely, very tedious and time-consuming, but, unfortunately, it cannot be avoided.
This guide from the CPA is also helpful for people looking to file themselves as there have been reports of CRA auditing Cryptocurrency investors for irregularities in their numbers. Or maybe consider getting professional advice the first time and refer to the CPA guide as well.
This free ACB calculator is quite helpful even if you want to do it yourself. The calculator also has a how-to guide. Although if you’re a high volume trader that needs to file as a business, it may make more sense to get an accountant. And maybe, considering the complexities of crypto trading, any trader who needs to report her/his crypto-based earnings, should consider consulting an accountant.
If you have any questions or concerns, feel free to check out the Canada Revenue Agency’s official guide for cryptocurrency traders.
Disclaimer: Please consult a qualified Tax Accountant. This article is for general information purposes only, and it should not, under any and all circumstances, be treated as tax advice.
Download Your Coinberry Account Activity History
We have introduced a new feature on Coinberry that will allow you to download your entire activity in a .csv file (which you can open in Excel). Login to your account, go to your Dashboard and click on Coinberry Activity to begin the download.