Crypto Tax Planning

Cryptocurrencies and NFTs have become increasingly common in investor portfolios, particularly among millennial and Generation Z investors. As cryptocurrency and blockchain innovations evolve, investors need to understand how these innovations fit within existing tax regimes to avoid harsh or unnecessary penalties from the Canada Revenue Agency.

Crypto Tax Lawyer can help investors with cryptocurrency tax planning, crypto estate planning, and everything they need to minimize their tax responsibilities from trading cryptocurrency.

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Crypto Tax Planning Strategies

Crypto Tax Lawyer in Canada works with investors to find the best crypto tax planning strategies for their situation. There are many tools and strategies you can deploy to reduce the amount of tax you owe from cryptocurrency investments, and we help you identify those opportunities and apply them throughout the year so that you’re ready come tax time.

Income Splitting

Income splitting is the practice of one partner transferring part of their income to a spouse who earns a lower income. This can reduce the taxes owed on their combined total as tax rates increase at higher income levels. Income splitting is typically done with retirement income. It can also be done before retirement, but it becomes more complicated.

Buying Assets Before Year End

Crypto Tax Lawyer can advise you on all of the tax implications that come with timing the purchase of an asset. Before you time crypto purchases in this way, find out whether or not buying assets before year end will affect your tax liability or not.

Pension Plans

Cryptocurrency can be a very volatile asset, and as such, cryptocurrencies have only attracted limited investment from pension funds. That said, arms’ length crypto investing has become increasingly common as retail investors seek out funds with crypto exposure without having to hold the asset themselves.

Selling Capital Assets

When it comes to crypto tax planning, cryptocurrencies may be treated as capital assets or may generate business income on sale. Understanding the taxation of your crypto transactions is the key first step to both reporting the transactions on your tax return and tax planning to minimize your tax liability. Selling cryptocurrency is a taxable event, but there are ways to reduce your tax liability on the sale of crypto assets, such as setting up a corporation to carry out active trading.

TFSAs

Currently, you cannot hold cryptocurrencies or NFTs in a Tax-Free Savings Account. However, you may be able to reduce your taxes by investing in a cryptocurrency ETF through a TFSA, although this does not provide you with direct ownership of crypto.

RESP

A Registered Education Savings Plan can reduce the tax bill on investments designed for your child’s education fund. As with a TFSA, you cannot own cryptocurrencies or other non-qualified assets, although you can include a cryptocurrency ETF.

Gifting & Estate Taxes

Crypto estate planning and giving crypto as a gift can be complicated from a tax perspective. There may be tax consequences to giving cryptocurrency as a gift. Gifting cryptocurrency to a trust can also be a complicated part of crypto estate planning.

Charity Donation

When you make a crypto donation to a registered charity, you can claim your contribution to offset capital gains made for the year, but the CRA views donations of crypto as a disposition of the asset and a taxable event.

Family Trusts

Family trusts are widely used as ways for parents and grandparents to transfer assets to their children and grandchildren. When transferring cryptocurrency to a family trust, the beneficiary has rights over the property in a family trust on the terms and conditions laid out in the trust deed that will govern how the trustee deals with income and assets. Crypto Tax Lawyer can help you with setting up a Family trust.

Capital Gains Vs. Capital Losses

Every time you sell a capital asset, you acquire a capital gain or capital loss. Capital losses can be claimed against capital gains to reduce your total tax bill. Claiming capital losses can be very useful when you are tax planning crypto transactions.

Will & Estate Planning

Estate planning can be complicated, even with the most straightforward assets. Crypto Tax Lawyer will help you with the complications involved in crypto estate planning and drafting a will that make sure your digital assets go to your beneficiaries with a smart crypto tax plan.

Legal Guidance

Contact Crypto Tax Lawyer for legal guidance when it comes to cryptocurrency tax planning. We can help you reduce your tax liability and ensure that you’ve properly disclosed and reported all of your crypto income to the CRA.

Crypto Tax Planning Capabilities

When you invest in crypto, you need to know when and how you have to pay taxes on cryptocurrency transactions. A crypto tax lawyer will help you go beyond the basics and create a crypto tax plan that protects your assets and reduces your tax bill while keeping up with current crypto tax laws in Canada.

Identifying Opportunities

Crypto tax planning means identifying opportunities to decrease your tax bill. That may include investing through a private corporation, claiming losses to offset your personal tax owing at the end of the year, or any number of strategies used to reduce taxes on investments.

Tax Minimization

There are two ways that profits generated from cryptocurrency can be taxed in Canada: business income or capital gains. A crypto tax lawyer will help you navigate how your crypto earnings are taxed and use tax minimization strategies to your advantage.

Advice for Tax Implications

Owning, selling, or buying goods and services with cryptocurrency can have tax implications, depending on how you use them. The CRA views cryptocurrency as an asset similar to a commodity, not as a currency like the dollar. Investors need advice for tax planning their crypto transactions.

International & Offshore Crypto Taxes

International and offshore cryptocurrency transactions can be complicated due to the digital nature of the asset. Tax planning for cryptocurrencies includes managing international and offshore crypto taxes, whether they are owed at home or abroad.

Capital Gains Tax

In Canada, only 50% of the profits earned from a capital gains transaction are considered taxable income. This can also be offset by claiming capital losses. Get help with crypto tax planning in order to reduce the capital gains taxes you may have to pay.

Reporting & Disclosures

Self-disclosure is key to avoiding tax penalties resulting from cryptocurrency. The CRA increasingly has tools to track cryptocurrency transactions and identify crypto owners. Investors must report their cryptocurrency transactions when they file their taxes.

Frequently Asked Questions

What is tax planning?

Tax planning is the practice of managing your tax obligations through various strategies with the help of a crypto tax lawyer. Tax planning is advisable for anyone dealing with an investment portfolio or crypto assets and/or complicated investments such as real estate, as they can find significant tax savings with the right strategies.

What is crypto tax planning?

Crypto tax planning looks specifically at tax strategies for crypto investors, businesses that regularly use cryptocurrency, crypto miners, and those who stake crypto. They include strategies such as offsetting capital gains with capital losses, selling crypto during low-income years, reducing your taxable income, trading through a Canadian-controlled private corporation, and many others. You can wind up owing significant sums in taxes if you’re not fully aware of the tax implications of your transactions. A professional who understands crypto tax planning will provide key guidance, crypto tax tips, and help you interpret tax laws as they apply to cryptocurrency.

Why is crypto tax planning important?

Cryptocurrency remains a relatively new asset, and while the CRA has clarified certain aspects of cryptocurrency and taxes, other issues remain unclarified. Crypto tax planning not only provides legal guidance through these complex situations but involves strategizing to make the most of your cryptocurrency transactions.

What are the benefits of crypto tax planning?

Crypto tax planning will not only help you prepare to file your crypto taxes, but it will put you in the best possible position from a tax perspective. Crypto Tax Lawyer will guide you through the legal strategies and practices you can use to reduce your tax bill.

Tax planning vs. tax avoidance?

Tax planning is about using all of the tools provided by the tax code to reduce your tax bill legally and in the spirit of the law. While tax avoidance is not the same as tax evasion, which is a crime that could result in fines or jail time, aggressive tax avoidance is still investigated by the CRA and can result in a CRA audit and penalties.

How to start tax planning with Crypto Tax Lawyer?

Tax planning is an ongoing practice that reduces taxes owed by businesses, individuals, and families. A team of professional accountants and tax lawyers will help you design an effective tax reduction strategy that keeps up with current laws and identifies opportunities to minimize your tax liability. Get in touch with Crypto Tax Lawyer to discuss your tax planning options.