Questions? Call 
Crypto Tax Lawyer Logo

Crypto Tax Tips

Get a Free Consultation Today

Cryptocurrency Tax Tips from the Experts


Know How Crypto Is Taxed

The Canada Revenue Agency treats NFTs and cryptocurrency the same way it does commodities. Money earned from NFT or crypto, including profits from trading, mining, and buying or selling with crypto, is taxed either as business income or capital gains. Earnings taxed as business income will be subject to normal income tax rates, while only half of the profits from capital gains are taxed.


Calculate Your Capital Gains Taxes Based On Your Crypto Income

Capital gains taxes apply to capital income, i.e., money earned from investments rather than business. The courts have developed a number of tests that are applicable to differentiate between capital and income; however, the determination of whether transactions are on capital account or income account is one of the more complex challenges in Canadian tax law. Determining the appropriate way to report your NFT and cryptocurrency transactions will usually require a memorandum based on an analysis of your trading history.


Record All Transactions

In the case of a CRA crypto audit, record all transactions. The CRA requires investors to keep detailed records of all NFT or cryptocurrency transactions, including barter transactions (buying and selling goods or services for cryptocurrency). Records should include information such as the date of transaction, the cryptocurrency address, the transaction ID, the value of the transaction in Canadian dollars at the time of the transaction, costs such as accounting, legal, and fees, and other information.


Trade Cryptocurrency in a Tax-Free or Tax-Deferred Account

At present, you cannot own cryptocurrency itself in a tax-free or tax-deferred account in Canada, such as an RRSP or TFSA. However, according to Canadian tax laws on cryptocurrency, you can invest indirectly in cryptocurrency through a Bitcoin ETF if you want to include crypto in a Canadian tax-advantaged account.


Identify Taxable vs Non-Taxable Crypto Activities

Not everything you do with NFT or crypto is a taxable event. Selling cryptocurrency, trading one cryptocurrency for another, and buying goods or services with crypto are all taxable. Buying crypto with fiat currency or transferring crypto from one wallet to another are non-taxable events. Get more crypto tax tips to make sure you know whether transactions are taxable.


Identify if your Crypto Income Is a Business Income or Capital Gain

It’s critical that taxpayers understand what category of income they are earning to plan their taxes accordingly. The courts have developed a number of tests to determine if transactions are considered to be capital or income. The distinction between business income vs. capital gains taxes usually relies on the consistency of the revenue. More frequent trading is more likely to be categorized as business income.


Know the Different Types of Crypto Taxes

Our crypto tax tips will help you plan for reporting your crypto tax income and setting aside the funds you need to pay NFT and crypto taxes. Whether you have to pay capital gains taxes or taxes on business income can significantly change the amount you owe the CRA.


Stay Up-to-Date on Crypto Tax News

NFTs and cryptocurrency remain a relatively new investment, and regulations continue to evolve. Keep up-to-date with crypto tax news and cryptocurrency tax tips when you’re planning your tax return.


How to Calculate Crypto Income Tax

he amount of crypto tax you will have to pay depends on your other sources of income. Whether the income is considered business income or a capital gain, it is added to your total income when determining your marginal tax rate.


Consider Airdrops Vs. Forks

Airdrops occur when a new crypto project sends out free tokens to early adopters. Frequent crypto traders may receive airdrops in their accounts, but you should know that this may or may not be a taxable event.

In a fork, a blockchain network upgrades with a new rule. Hard forks generally issue a cryptocurrency and this may not necessarily be a taxable event.


Report All Crypto Transactions on Your Tax Return

When you file your taxes, make sure you report every NFT or crypto transaction conducted in the last year. This includes transactions where you purchase goods and services with crypto, donate crypto, and exchange one currency for another. You do not need to report or pay taxes when you purchase and hold cryptocurrency.


Report as a Capital Gain or Income

Whether or not you report income as a capital gain or income can affect how much you have to pay in taxes. If you’ve earned a capital gain, only half of the profits are taxed, and you can claim capital losses against it. It may prove to be a more favourable way to report your NFT or crypto taxes than as income. Talk to a crypto tax lawyer about determining the status of your income.


Use Crypto Tax Software

Crypto tax software can help you keep records of all of your transactions automatically. The right software will also calculate what you may have to pay in crypto taxes. The software makes sure you have a complete list of crypto transactions when it’s time to file.


Donate Crypto

Cryptocurrency donations can also have tax implications, even to a registered charity. When you donate cryptocurrency, it is considered a disposition of an asset, and it is a taxable event. You will be liable for crypto taxes as though the donation were sold at fair market value. The charity can issue a receipt, but only for the purchase value of the cryptocurrency. The donor will have to pay crypto taxes on the difference.


Prepare Ahead of Time

Crypto tax help should prepare you ahead of time for how much you’re going to have to pay. When you’re prepared ahead of time, you won’t be caught off-guard when it’s time to report your income and pay crypto taxes.


Work with an Expert

Work with an expert to get tips for NFT and crypto taxes and help with preparing your tax return as a cryptocurrency trader. A crypto tax lawyer can help you minimize your tax obligations, protect your assets, and preempt any issues with your taxes.

Additional Crypto Tax Tips

If You Stake Crytpo

Staking crypto is a way for investors to generate rewards from holdings they don’t plan to sell anytime soon. When you stake crypto, you commit your assets to support blockchains and confirm transactions in exchange for passive income. All income, even proceeds generated in cryptocurrency, must be reported to the CRA.

If You Lose Your Crypto

Lost, stolen, and hacked crypto is always a major concern, but there are also questions about what happens from a tax perspective. The CRA has yet to provide clear guidelines on whether or not lost crypto can be claimed as a capital loss or whether you would claim fair market value or the original cost as a loss.

If You Exchange or Trade Your Cryptocurrency

When you exchange one cryptocurrency for another or buy goods and services with cryptocurrency, it is considered a disposition of the asset. The CRA treats it as though you sold it for fair market value, i.e., the market price on the day of the trade.

Need Assistance with Crypto Taxes?

Fill out the form and we'll be in touch.