Canadian Tax Treatment of Cryptocurrency: Complete Guide

When you buy Bitcoin, sell Ethereum, or earn crypto from staking in Canada, the Canada Revenue Agency (CRA) doesn’t see it as money. It sees it as property. That one shift changes everything when it comes to how much tax you owe-and how badly you can mess up your return.

Over 3.2 million Canadians own cryptocurrency. That’s about 1 in 12 adults. And according to the CRA’s 2025 compliance review, 73% of crypto tax returns had material errors. Most of those mistakes? Wrong cost basis, misclassifying income, or forgetting to report trades on foreign exchanges. This isn’t about being lazy. It’s about confusion. The rules are clear-but they’re not simple.

How the CRA Treats Cryptocurrency

The CRA’s position hasn’t changed since 2013: crypto is not currency. It’s a commodity. That means every time you trade, sell, or spend it, you trigger a taxable event. Buying Bitcoin with CAD? No tax. Holding it? No tax. But swap that Bitcoin for Dogecoin? Taxable. Use it to pay for groceries? Taxable. Even sending crypto to a friend as a gift can be taxable if it’s not truly a personal transfer.

The CRA doesn’t care if you’re a casual investor or a full-time trader. What matters is what you did with the asset. And how you report it.

Capital Gains vs. Business Income: The Two Paths

There are two ways crypto income gets taxed in Canada-and the difference could cost you thousands.

Capital gains apply when you dispose of crypto you bought as an investment. That includes selling it for CAD, trading it for another coin, or using it to buy something. Only 50% of the profit is taxable. If you bought $10,000 worth of Ethereum and sold it for $25,000, your gain is $15,000. Only $7,500 counts as income.

Business income kicks in when crypto is part of your regular income stream. This includes mining, staking rewards, airdrops, or being paid in crypto for services. Here, 100% of the value at the time you receive it is taxable. If you earned $8,000 in ETH from staking, that’s $8,000 in taxable income-no discount.

So why does this matter? Let’s say you made $100,000 in crypto gains in 2025. If it’s treated as capital gains, you’d pay roughly $20,300 in combined federal and Ontario taxes. If the CRA decides it’s business income? You’re looking at $40,600. That’s a $20,000 difference. And the CRA is getting better at spotting the difference.

What Counts as a Taxable Event?

Not every crypto action triggers tax. Here’s what does:

• Selling crypto for Canadian dollars
• Trading one cryptocurrency for another (e.g., BTC for SOL)
• Using crypto to buy goods or services
• Receiving crypto as payment for work or services
• Earning staking, mining, or yield rewards
• Receiving airdrops (unless you didn’t do anything to qualify)

And here’s what doesn’t:

• Buying crypto with CAD
• Holding crypto without selling or trading
• Transferring crypto between wallets you own
• Receiving crypto as a true gift (no strings attached)

That last one is tricky. If your uncle sends you 1 BTC as a birthday gift, no tax. But if you mined it, staked it, or earned it from a platform? Taxable. The CRA looks at how you got it-not just what you got.

How Much Tax Will You Actually Pay?

Canada uses progressive tax brackets. For 2025, here’s the federal rate structure:

• 15% on the first $55,867 of taxable income
• 20.5% on income between $55,868 and $111,733
• 26% on income between $111,734 and $173,205
• 29% on income between $173,206 and $246,752
• 33% on anything over $246,752

Then add provincial taxes. Ontario adds 5.05% up to $49,231, then climbs to 13.16% above $220,000. Quebec? 15% up to $49,275, then jumps to 25.75% over $121,375. A person in BC earning $100,000 in capital gains pays about $20,300 total. The same person earning $100,000 in staking rewards? Around $40,600.

And here’s the kicker: you can’t offset capital gains with business losses. If you lose money trading but earn crypto from staking, those two streams stay separate. The CRA treats them like different jobs.

Tax Loss Harvesting: The Legal Way to Cut Your Bill

If you’ve got crypto that’s dropped in value, you might be able to use it to reduce your tax bill. That’s called tax loss harvesting.

Here’s how it works: Sell a crypto asset at a loss. Use that loss to offset capital gains from other sales. Only 50% of the loss counts, so a $10,000 loss reduces your taxable gain by $5,000.

But there’s a trap: the superficial loss rule. If you sell a coin at a loss and buy it back-or buy a substantially identical coin-within 30 days before or after the sale, the CRA disallows the loss. That means if you sell your BTC at a loss on March 1, you can’t buy BTC again until April 1. Same coin. Different coin. Doesn’t matter. If it’s substantially identical, the loss vanishes.

One Reddit user, u/TaxSmartTrader, saved $3,200 in 2024 by selling Ethereum at a loss in December, waiting 31 days, then buying it back. That’s the kind of move that turns a bad year into a tax win.

Reporting: What Forms You Need

Capital gains from crypto go on Schedule 3 of your T1 return. You’ll need to report:

• Date of acquisition
• Cost basis (what you paid)
• Date of disposal
• Proceeds of disposition (what you sold it for)
• Capital gain or loss

Business income from mining, staking, or trading as a business? That goes on Form T2125. This is where you report revenue, expenses (like electricity for mining), and net profit.

And yes-you have to report every exchange. Whether it’s Bitbuy, Kraken, or Binance (yes, even if it’s based overseas). The CRA has access to data from Canadian exchanges and is pushing for global reporting. Missing one? That’s a red flag.

Common Mistakes (And How to Avoid Them)

Based on the CRA’s 2025 audit data, here are the top three errors:

1. Incorrect cost basis (42% of errors): People forget to include fees, or use average cost instead of specific identification. Always track the exact purchase price of each coin you sell.
2. Misclassifying income (31%): Treating staking rewards as capital gains instead of business income. If you didn’t buy it, you didn’t realize a gain-you earned income.
3. Ignoring international exchanges (27%): If you traded on Binance, KuCoin, or Coinbase Pro (outside Canada), you still owe tax. The CRA now gets data from foreign platforms through international agreements.

Use software. Not because you’re bad at math. Because the CRA expects you to track every transaction. Manual spreadsheets? You’ll miss something. And when you do, you’ll pay more.

Software and Tools: What Actually Works

There are dozens of crypto tax tools. But only a few are built for Canada.

TurboTax Canada has crypto features, but users complain they’re incomplete. 3.8 stars from over 1,200 reviews. Koinly, on the other hand, scores 4.6 stars. Why? It auto-imports from Canadian exchanges, generates CRA-specific Schedule 3 and T2125 reports, and flags superficial loss risks.

87% of major Canadian exchanges now offer pre-filled tax reports. Wealthsimple, Coinsquare, and Bitbuy all give you downloadable statements. Use them. Don’t rely on your own records alone.

What’s Changing in 2026?

The draft legislation released in August 2025 isn’t just a warning-it’s a roadmap. Starting in 2026, any crypto transaction over $10,000 will need to be reported by exchanges to the CRA. That’s the same threshold as cash transactions. It’s not a coincidence.

By 2027, the Department of Finance expects to collect an extra $285 million a year from better crypto compliance. That means audits will increase. Penalties will be stricter. And the CRA will have more tools to catch mismatches.

Also, the 2025 audit showed that 29% of crypto owners admitted to incomplete reporting. That’s a ticking time bomb. The CRA doesn’t need to prove fraud. They just need to prove you didn’t report what you should have.

Final Advice: Don’t Guess. Document.

You don’t need to be a tax expert. But you do need to be organized.

• Track every transaction-buy, sell, trade, receive.
• Use software that supports Canadian tax rules.
• Keep records for at least six years (the CRA can audit that far back).
• If you’re mining, staking, or trading daily, treat it like a business. Deduct expenses. File T2125.
• Don’t try to time the market to avoid tax. The CRA sees it all.

There’s no loophole. No secret. Just rules. And if you follow them, you’ll pay what you owe-and nothing more.

If you’re unsure about how to report your crypto, talk to a tax professional who understands digital assets. Don’t rely on Reddit advice or generic software. The rules are complex, but they’re not impossible. With the right records and tools, you can get it right-and keep more of what you’ve earned.