Crypto-assets are digital assets that exist on a cryptographically secured distributed ledger. There are many types of crypto-assets, the most common being cryptocurrencies, such as Bitcoin, Ethereum and Tether. Transactions related to crypto-assets often have tax implications and must be reported on your income tax return.
If you’re a crypto-asset user, knowing whether your transactions resulted in a capital gain (or loss) or in business income (or loss) is important because it may affect your taxes.
Carrying on a business as a resident of Canada
As a resident of Canada, you’re generally considered to be carrying on a business if:
- your course of conduct indicates that you are disposing of crypto-assets in a way capable of producing gains and
- you conduct business activities with regularity or continuity.
However, there are other factors which may indicate that you are carrying on a business and the determination must be made case by case. For example, even an isolated crypto-asset transaction could count as business income when it is considered “an adventure or concern in the nature of trade.”
Tax filing dates to remember
If you or your spouse are self-employed, or considered to be carrying on a business, you and your spouse’s tax return is due June 15, 2024. If you or your spouse have taxes owing, your due date for payment is April 30, 2024.
How to fulfill your tax obligations
To report business income from your crypto-asset transactions, you can find information in Canada Revenue Agency (CRA) guide T4002, Self-employed Business, Professional, Commission, Farming, and Fishing Income.
What records should you keep
Keep records when you purchase, dispose of, or mine crypto-assets to ensure you have accurate information about your activities. When using third-party software or exchanges for your crypto-asset transactions, maintain and download your original data at regular intervals.
You should keep records of the following information for your crypto-asset transactions:
- The number of units and type of crypto-asset for each transaction;
- The date and time of each transaction;
- The value of the crypto-asset (in Canadian dollars) at the time of each transaction;
- A description of the nature of each transaction and the other party to the transaction (even if it is just their crypto-asset address);
- The addresses associated with each digital wallet used;
- The beginning wallet balance (and its cost) and ending wallet balance for each crypto-asset for each year.
Valuing your business inventory
If you hold crypto-assets as business inventory, you need to know the value and cost of the crypto-assets in order to determine the amount of business income or loss that your business realized. Most of the time, you can use one of the following methods of valuing inventory consistently from year to year:
- Value each item in the inventory at the cost when it was acquired or at its fair market value at the end of the year (whichever is lower) or
- Value the entire inventory at its fair market value at the end of the year.
There may be cases in which you have to use other methods depending on the type of business you have.
Accepting crypto as payment for your business
If your business accepts cryptocurrency as payment for taxable property or services, the value of the cryptocurrency is calculated based on its fair market value at the time of the transaction.
Receiving crypto-assets in exchange for property or services is considered a barter transaction and must be reported as business income.
How to correct a previous reporting error
You may be able to reduce or avoid penalties and interest by voluntarily correcting your tax affairs in the following ways:
More information
For more information to help you determine whether your crypto-asset transactions are made on an account of business income or capital, refer to Information for crypto-asset users and tax professionals.
Associated links
Contacts
Media Relations
Canada Revenue Agency
613-948-8366
cra-arc.media@cra-arc.gc.ca
FAQs
Any cryptocurrency capital gains, capital losses, and taxable income need to be reported on your tax return. You can report your capital gains and losses on Form 8949 and your income on Form 1040 Schedule 1 or Schedule C depending on your situation.
How do you use crypto as proof of income? ›
Acceptable documents
Wallet transaction statement, screenshot of transaction records or a file (e.g. . csv file) showing a clear outline of the external wallet inflows and outflows. This should contain the date, transaction type (deposit/withdrawal), currency, amount, and wallet address for each crypto transaction.
How do you show crypto income in income tax? ›
Wait, crypto is taxed in India?
- Sign up and connect to a crypto tax calculator.
- Download your crypto tax report.
- Log into the Income Tax Portal and start your ITR-2.
- Report your capital gains in Schedule VDA.
- Report other income from crypto.
- Complete your other required schedules.
- Proceed to verification.
Yes, you must pay tax on your crypto if you hold it as an investment. In crypto investors' ideal world, taxes wouldn't apply to digital currency, however, as the federal government considers your crypto investments to be assets, they fall under the Capital Gains Tax (CGT) umbrella.
Do I need to report crypto if I didn't profit? ›
Yes, you should report crypto losses. The IRS might actually give you some money back. Crypto losses can be used to offset capital gains, and up to $3,000 can be deducted against your ordinary income.
Can the IRS see crypto transactions? ›
Cryptocurrencies are traceable, with transactions recorded on a public ledger accessible to the IRS. The IRS uses advanced methods to track crypto transactions and enforce tax compliance. Centralized exchanges provide user data to the IRS.
Does crypto earnings count as income? ›
Transactors pay fees to the validators on these blockchains, and any fees you receive are taxed as income in the year you receive them. Because you're paid in cryptocurrency, you must report any capital gains or losses if you use or convert the cryptocurrency.
Where do I enter crypto income? ›
In your Crypto Tax Calculator ATO myTax report, copy the figure next to "Total Net Income" in the Income Summary section and paste it into the amount box. Select "Save" and then "Save and Continue." For deductions relating to crypto; On the "Prepare your 2022-23 return" page, select "Add/Edit" next to deductions.
How do I use my cryptocurrency as evidence of assets? ›
Identifcation of the account, account ownership, and value of the total assets should be sufficient in most cases. If an account contains a liability, disclose that liability so that net asset value can be determined. The best evidence is to provide a formal valuation from a valuation professional or an accountant.
How do I record crypto on my tax return? ›
Report crypto in your tax return
– if you're reporting over $10,000 in capital gains and completing the CGT schedule with your tax return, report capital gains and losses at 'Other CGT assets and any other CGT events'.
2024 is the most important tax year for crypto investors to be reporting. For 2024, you still need to collect crypto data and properly report activity, including your cost basis. Starting in 2025, the IRS will have a “firehose of information” to verify whether past reporting was accurate, Gordon said.
How do taxes work if I get paid in crypto? ›
If you did have capital gains or losses, you'll also record them on your Form 1040/Schedule D. If you received wages in cryptocurrency, you'll record that amount as wages on your 1040. If you were paid for services in cryptocurrency, you'll record that amount as either other income on Sch 1 or income on Schedule C.
How much can I make on crypto without paying taxes? ›
Capital Gains Tax rate
If you earn less than $44,626 including your crypto (for the 2023 tax year) then you'll pay no long-term Capital Gains Tax at all. It's important to note that for NFTs deemed collectibles, you may pay a higher 28% tax on long-term gains.
How do I legally avoid crypto taxes? ›
There is no way to legally avoid taxes when cashing out cryptocurrency. However, strategies like tax-loss harvesting can help you reduce your tax bill legally. Converting crypto to fiat currency is subject to capital gains tax. However, simply moving cryptocurrency from one wallet to another is considered non-taxable.
How to report crypto on taxes? ›
Complete Form 8949 to document your cryptocurrency transactions. Transfer the totals from Form 8949 to Schedule D of your tax return. Report any ordinary income from cryptocurrency on Schedule 1 of Form 1040 unless you're self-employed, in which case you should use Schedule C.
Do you have to report crypto under $600? ›
You must report income, gain, or loss from all taxable transactions involving virtual currency on your Federal income tax return for the taxable year of the transaction, regardless of the amount or whether you receive a payee statement or information return.
Do you get a 1099 for cryptocurrency? ›
Currently, most major exchanges issue 1099 forms to customers. Starting in the 2025 tax year, all crypto exchanges operating in the United States will be required to issue Form 1099-DA to report capital gains and losses from crypto. Where can I get a crypto 1099? 1099 forms are typically issued by your crypto exchange.
How much do you have to earn before you pay taxes on crypto income? ›
Long-term rates if you sold crypto in 2023 (taxes due in April 2024)
| Tax rate | Single | Married filing jointly |
|---|
| 0% | $0 to $44,625 | $0 to $89,250 |
| 15% | $44,626 to $492,300 | $89,251 to $553,850 |
| 20% | $492,301 or more | $553,851 or more |
| Short-term capital gains are taxed as ordinary income according to federal income tax brackets. |
6 days ago
While Coinbase One subscribers can get a pre-filled Form 8949, this form only includes transactions from Coinbase — not your other crypto wallets and exchanges. All of your disposals of cryptocurrency and other capital assets should be reported on Form 8949.
