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Learn how your cryptocurrency investments are taxed in Canada

What you need to know about declaring crypto when you file your tax return this year
NetcoinsCanada
Netcoins has created a quick guide to crypto taxes for your last-minute returns.

Last year, more and more Canadians started investing in cryptocurrencies than ever before, thanks in part to the ease afforded by online crypto trading platforms, such as Netcoins.

Netcoins offers 22 coins to trade (with more to come), no funding fees and free cash withdrawals. They also offer unique features like price alert notifications and limit orders so that you have more control over how you buy crypto. Plus, it only takes a few minutes to get started.

So, if you were one of the many Canadians who invested in crypto last year, Netcoins has created a quick guide to crypto taxes for your last-minute returns. Let’s dive in.

Capital gains

In Canada, most income you earn is taxable, including money earned from trading.

Most Canadians who dabble in crypto will fall under the trading category because they’re buying and selling crypto for profit. This would then be taxed as a capital gain.

A capital gain is an increase in an asset’s value and the profit you make from selling it. You are only taxed when these gains are realized. For example, when crypto is sold at a higher rate than you bought it for.

Let’s say you sold all your bitcoin for $50,000 but originally bought it for $20,000. Your capital gain is $30,000.

In Canada, 50% of your capital gains are taxable. So, out of the $30,000 profit you made from selling, you would have to report $15,000 as part of your income for taxes.

Capital losses

Capital losses are the opposite of capital gains. It’s when the value of your investment decreases from the original price you bought it for. Capital losses can be used to offset any capital gains and may reduce the overall total tax you have to pay.

Transferring crypto

If you buy crypto from Netcoins and transfer it to a crypto wallet or another discount brokerage, that is not considered a taxable event. It’s similar to transferring money from your chequing account to your savings account. You’re still in possession of it therefore you are not required to pay taxes. 

Crypto-to-crypto conversions

If you convert one cryptocurrency to another (example: bitcoin to XRP), a transaction has officially been made and you will be taxed on the capital gains. It is your responsibility to track the price you bought each crypto asset at, your conversions, and any realized capital gains.

Using crypto

If you actively use bitcoin as a means of exchange to buy goods, no evaluation is needed. Using bitcoin as money is similar to using Canadian dollars as money to buy goods, like a car.

Buying and holding crypto

Do you have to report crypto if you buy and never touch it? No.

If your crypto grows in value and you do not sell it, that is considered unrealized gain because you haven’t sold it. You do not have to report these for tax purposes.

However, if as a Canadian you hold over $100,000CAD worth of cryptocurrencies in a foreign crypto exchange (example: Coinbase), there is a special T1135 form you must file to declare investments held outside of Canada during the year.

Hopefully, this quick guide was helpful in understanding the basics of how crypto is taxed in Canada. To dive a little deeper, you can read the full guide here (provided by Netcoins). 

Note: If you used Netcoins to buy crypto in Canada, getting access to your account history for tax purposes is easy. Users can download their transaction history by logging onto their Netcoins account, clicking the dashboard and selecting “see all transactions.”

To learn more and to buy bitcoin, ether and more easily with Netcoins, visit netcoins.ca.