In Canada, the CRA treats cryptocurrency as property, and gains from it are taxed either as business income or capital gains under income tax rates. Thus, establishing whether or not your transactions are part of a business is important (including day traders). Only 50% of capital gains are taxable, while 100% of business income is taxable.
Crypto Tax Rates in Canada
Canada does not have short-term or long-term capital gains tax rates. Crypto capital gains are taxed at the Federal Income Tax rate and the Provincial Income Tax rate. You pay 50% tax on your total capital gains as an individual crypto holder, while businesses and professional day traders will pay 100%.
on the first $53,359
on the next $53,358
$53,359 up to $106,717
on the next $58,713
$106,717 up to $165,430
on the next $70,245
$165,430 up to $235,675
on the portion over $235,675
$235,675 and up
Here are the 2022 income tax packages with rates for each province and territory, which are calculated in the same way as federal tax.
Canadian Crypto Capital Gains Tax
50% of your capital gains are taxable in Canada as an individual, and taxpayers may use up to 50% of crypto capital losses to offset capital gains.
Instances in which you will trigger Capital Gains Tax in Canada include:
Trading one crypto for another crypto (including stablecoins)
Using crypto for purchases.
Crypto is not considered legal tender in Canada, thus when taxpayers receive goods or services in exchange for crypto, they will have a capital gain or loss on the spent crypto's change in value since they acquired it.
Crypto Capital Losses in Canada
You won't pay any Capital Gains Tax on any capital losses from crypto and you can offset your capital losses against your crypto capital gains for the tax year to reduce your overall tax liability.
The 50% rule for capital gains also applies equally to your capital losses and this means you can only offset half your net capital loss in a given tax year. If you have more losses after doing this in a given year, you may carry this figure over to future financial years to offset against future gains.
Canada Cost Basis Method
When calculating crypto capital gains and losses, Canada uses the adjusted cost basis method. This method takes into consideration the cost of the asset along with any fees associated with the transaction. If you have multiple identical assets, the CRA says to use the average cost basis method.
Income Tax and Crypto in Canada
Ordinary Income Tax is applicable when you earn crypto in Canada, such as being paid in crypto. This is determined by the fair market value of the crypto at the time you earned it. This also includes earnings from activities like staking and mining rewards. 100% of your ordinary income obtained from crypto is considered taxable income in Canada.
Examples of crypto transactions that would be considered income include:
Getting paid in crypto.
Earning interest or dividends.
Crypto capital gains in Canada are taxed at the same rate as Federal Income Tax, so the table above applies to both income and capital gains from crypto.
Tax-Free Crypto Transactions in Canada
These types of transactions will not have a taxable impact in Canada:
Buying crypto with fiat.
Transferring crypto between your own wallets or exchange accounts.
Receiving crypto as a gift.