There are a couple of layers to this query, Marc, so I’ll break down the reply into three components: enterprise earnings vs. capital features, what information the Canada Income Company (CRA) would possibly ask for, and some suggestions for tax time.
1. Are your crypto earnings enterprise earnings or capital features?
Right here’s why the excellence issues: In Canada, enterprise earnings and capital features are taxed in a different way: 100% of enterprise earnings is taxable, whereas solely 50% of capital features are taxable.
Should you spend money on bitcoin, ethereum or different cryptocurrencies, you might be questioning which actions are taxable. Shopping for and holding crypto isn’t a taxable occasion, neither is transferring crypto between two wallets you maintain. However when you money it out, promote it, spend it (together with shopping for a distinct crypto) or give it away, that’s taxable.
To find out in case your crypto earnings must be taxed as enterprise earnings or capital features, the CRA seems at completely different features of your buying and selling exercise, reminiscent of:
- How continuously you purchase and promote crypto
- Your intentions when shopping for crypto
- How lengthy you maintain on to crypto property
- The period of time you commit to crypto buying and selling actions
- Any business-related actions, reminiscent of making ready a marketing strategy or selling a service
“Enterprise actions usually contain some regularity or a repetitive course of over time. Every scenario must be checked out individually,” the CRA says on its web site. “In some instances, a single transaction could be thought of a enterprise, for instance when it’s an journey or concern within the nature of commerce. Whether or not you’re carrying on a enterprise or not have to be decided on a case by case foundation.”
Study extra about how the CRA views cryptocurrency buying and selling, in addition to crypto mining and crypto staking, and bookmark MoneySense’s information to crypto and taxes.
2. What crypto information would possibly the CRA ask for?
Whether or not your crypto exercise is taken into account a enterprise, an funding or a passion, you will need to maintain detailed information for the earlier six years, together with:
- Dates of crypto transactions
- Cryptocurrency addresses concerned in every transaction
- Transaction IDs (assigned by the crypto community)
- Receipt for every crypto buy or switch
- Costs of the crypto in Canadian {dollars} if you made the transaction
- Description of every transaction and the receiving celebration’s tackle
- Transaction information for all the crypto exchanges or buying and selling platforms you utilize
- Transaction information for your entire crypto wallets
- Authorized and accounting prices, together with tax software program
In case you are a crypto miner, you will have to maintain the next information: