In This Article
- How Does the CRA Tax Crypto?
- Capital Gains (Most Common)
- Business Income (Active Traders)
- What Is a Taxable Event?
- How to Calculate Your Capital Gain
- Crypto Mining, Staking, and Airdrops
- Mining Income
- Staking Rewards
- Airdrops
- How to Report Crypto on Your Tax Return
- Crypto Tax Software for Canadians
- Common Mistakes to Avoid
- Frequently Asked Questions
- What if I lost money on crypto?
- Do I need to report crypto if I did not sell?
- Can I hold crypto in my TFSA to avoid taxes?
- What if I used a foreign exchange?
If you bought, sold, traded, or earned cryptocurrency in Canada, you have tax obligations to the CRA. The Canada Revenue Agency treats crypto as a commodity — not a currency — which means every sale, trade, or swap is a taxable event.
This guide explains exactly how crypto is taxed in Canada, how to calculate your gains, and what you need to report on your tax return.
How Does the CRA Tax Crypto?
The CRA classifies crypto profits into two categories:
Capital Gains (Most Common)
If you buy crypto, hold it for a period, and sell it at a higher price — the profit is a capital gain. Only 50% of capital gains are included in your taxable income (the “inclusion rate”).
Example: Buy $5,000 of Bitcoin. Sell for $8,000. Capital gain = $3,000. Taxable amount = $1,500 (50% of $3,000). Tax owed depends on your marginal tax rate.
Business Income (Active Traders)
If you trade crypto actively and frequently — buying and selling multiple times per day or week — the CRA may classify your profits as business income. Business income is 100% taxable (no 50% inclusion rate).
The CRA looks at factors like: frequency of trading, holding period, knowledge/expertise, time spent, and intent to profit. There is no single rule — it is a judgment call.
What Is a Taxable Event?
These actions trigger a taxable event:
- Selling crypto for CAD or any fiat currency
- Trading one crypto for another (e.g., swapping BTC for ETH)
- Using crypto to buy goods or services
- Gifting crypto (deemed disposition at fair market value)
These do NOT trigger a tax event:
- Buying crypto with CAD (no gain until you sell)
- Transferring crypto between your own wallets
- Holding crypto (unrealized gains are not taxed)
How to Calculate Your Capital Gain
Capital Gain = Proceeds of Disposition minus Adjusted Cost Base (ACB) minus transaction fees.
The ACB is the average cost of all units you own. When you buy Bitcoin at different prices over time, you average them together using the “superficial loss” method (similar to stocks).
Example with multiple purchases:
- Buy 0.5 BTC for $20,000 ($40,000/BTC) — ACB = $40,000/BTC
- Buy 0.5 BTC for $25,000 ($50,000/BTC) — Total: 1 BTC, total cost $45,000, ACB = $45,000/BTC
- Sell 0.5 BTC for $30,000 ($60,000/BTC) — Proceeds: $30,000, ACB of 0.5 BTC = $22,500
- Capital Gain = $30,000 – $22,500 = $7,500. Taxable: $3,750 (50%).
Crypto Mining, Staking, and Airdrops
Mining Income
Crypto received from mining is generally treated as business income at the fair market value when received. You can deduct mining expenses (electricity, hardware) against this income.
Staking Rewards
Staking rewards are taxable when received. The CRA has not published specific guidance, but most tax professionals treat them as business income or capital gains depending on the frequency and nature of the activity.
Airdrops
Free tokens received via airdrops are taxable at their fair market value when you receive them. The cost base is the value at the time of the airdrop.
How to Report Crypto on Your Tax Return
- Track all transactions throughout the year. Use a crypto tax tool like Koinly, CoinTracker, or Wealthica to automatically import trades from exchanges.
- Calculate your ACB for each crypto asset you disposed of.
- Report capital gains/losses on Schedule 3 of your T1 tax return.
- Report business income (if applicable) on Form T2125.
- Keep records for 6 years. The CRA can audit your crypto transactions going back 6 years.
Crypto Tax Software for Canadians
Koinly: Imports from 400+ exchanges. Free to track; paid plans starting at $49/year for tax reports. Supports Canadian tax rules.
CoinTracker: Integrates with 300+ exchanges and wallets. Free for up to 25 transactions; $59+/year for larger portfolios.
Wealthica + Adjusted Cost Base (AdjustedCostBase.ca): Canadian-made portfolio tracker + a free tool for calculating ACB using the superficial loss rules.
Common Mistakes to Avoid
- Not reporting crypto-to-crypto trades. Swapping BTC for ETH is a taxable event — many people miss this.
- Not tracking airdrops and staking rewards. These are taxable even though you did not “buy” anything.
- Using FIFO instead of ACB. Canada uses the average cost method (ACB), not first-in-first-out. Using the wrong method will produce incorrect results.
- Forgetting about DeFi transactions. Providing liquidity, yield farming, and token swaps are all taxable events.
Frequently Asked Questions
What if I lost money on crypto?
Capital losses can be used to offset capital gains from crypto or other investments. If you have no gains this year, losses can be carried back 3 years or carried forward indefinitely.
Do I need to report crypto if I did not sell?
No. Simply holding crypto is not a taxable event. You only report when you dispose of it (sell, trade, swap, gift, or use to buy something).
Can I hold crypto in my TFSA to avoid taxes?
You cannot hold crypto directly in a TFSA. However, you can hold crypto ETFs (like BTCX or ETHX) inside a TFSA for tax-free gains.
What if I used a foreign exchange?
It does not matter where the exchange is based — you must report all crypto gains to the CRA regardless. If you hold over $100,000 in crypto on foreign exchanges, you may also need to file a T1135 foreign income verification statement.