The Basics of Crypto Taxation in Canada

Let's dive into how cryptocurrency transactions are taxed in Canada! It's a topic that can seem complex, but we'll break it down in a way that's easy to understand.First things first: in Canada, cryptocurrency isn't treated as actual currency for tax purposes. Instead, the Canada Revenue Agency (CRA) views crypto transactions more like bartering[1]. This means that when you use cryptocurrency to buy goods or services, it's considered a barter transaction.

Capital Gains and Losses

For most people, buying and selling crypto falls under capital gains tax rules. Here's how it works:

1. If you sell your crypto for more than you paid, you've made a capital gain.
1. If you sell for less, you've incurred a capital loss.

The good news? Only half of your capital gains are taxable in Canada[2]. So if you made a $1000 profit on your Bitcoin sale, only $500 of that would be added to your taxable income.

Calculating Your Gains or Losses

To figure out your gain or loss, you'll need to know two things:

1. Your adjusted cost base (ACB): This is usually the average cost of all the crypto you've bought.
1. The proceeds of disposition: Typically, this is the sale price of your crypto.

If the proceeds are higher than your ACB, you've got a gain. If they're lower, you've got a loss[2].

Record Keeping is Key

The CRA recommends keeping detailed records of all your crypto transactions. This includes:

• Purchase receipts
• Sale receipts