Canada Crypto Tax Guide 2025

The Canada Revenue Agency (CRA) treats cryptocurrency as a commodity subject to capital gains tax or business income tax depending on your activity. Canada offers favorable treatment with only 50% of capital gains being taxable (the inclusion rate). However, the CRA is actively enforcing crypto tax compliance and has data-sharing with major exchanges.

The critical distinction in Canada is whether crypto transactions are capital gains (50% taxable) or business income (100% taxable). Most individual investors are treated as having capital gains. Business income classification applies if: you trade frequently, use sophisticated strategies, have substantial time investment, or crypto is your primary income source. CRA considers each case individually.

For capital gains treatment, only 50% of your net gains are taxable (the inclusion rate). This 50% is added to your income and taxed at your marginal rate (federal + provincial). For example, if you have CAD $10,000 in crypto gains, only CAD $5,000 is taxable. Combined federal and provincial rates range from approximately 20-27% effective tax on gains for most taxpayers.

Report cryptocurrency capital gains on Schedule 3 (Capital Gains or Losses) of your T1 tax return. You must list: proceeds of disposition, adjusted cost base (ACB), outlays and expenses, and capital gain/loss. Only 50% of the net capital gain flows to Line 12700 of your T1 as taxable income. CRA requires detailed documentation of all transactions.

If you hold cryptocurrency worth more than CAD $100,000 on foreign exchanges or wallets at any time during the year, you MUST file Form T1135 (Foreign Income Verification Statement) to report foreign property. This is separate from reporting capital gains. Failure to file T1135 carries penalties of $25/day (up to $2,500) plus potential prosecution. The $100,000 threshold includes all foreign property, not just crypto.

Canada uses the average cost basis method (similar to ACB for stocks) for identical properties. When you buy cryptocurrency multiple times, you calculate the average cost per unit. When you sell, you use this average cost to determine gain/loss. This differs from FIFO used in the US. ACB must be tracked separately for each cryptocurrency type.

Trading one cryptocurrency for another is a disposition triggering capital gains (or business income if applicable). You must calculate the gain or loss in CAD at the moment of trade using the fair market value of both cryptocurrencies. This applies to all swaps, including DeFi trades. The CRA explicitly confirms crypto-to-crypto trades are taxable.

Mining rewards and staking income are treated as business income (100% taxable) if done commercially, or capital gains if occasional. Commercial miners can deduct expenses (electricity, equipment, depreciation). Casual miners report as income. The CAD fair market value when received is taxable and becomes your ACB for future sales.

Capital losses can only offset capital gains—they cannot offset employment or business income. Unused capital losses can be carried back 3 years or carried forward indefinitely to offset future capital gains. Business income losses can offset all income types and have similar carryback/forward rules. This makes the capital vs. business classification significant for loss utilization.

Maintain comprehensive records for at least 6 years: transaction dates, CAD values at transaction time (using Bank of Canada rates preferred), exchange names, wallet addresses, ACB calculations for each cryptocurrency, T1135 year-end foreign holdings if applicable, and documentation supporting capital vs. business classification. CRA is actively auditing crypto transactions.

Taxxy automatically generates Schedule 3 with proper ACB calculations and 50% inclusion rate, identifies T1135 reporting requirements (CAD $100,000 threshold), categorizes capital gains vs. business income with risk indicators, provides CAD valuations using Bank of Canada rates, tracks loss carryforwards/carrybacks, and produces CRA-compliant documentation with detailed transaction logs.