Cryptocurrency isn’t a fringe investment anymore in Canada, it’s a mainstream asset class. From everyday investors holding Bitcoin or Ethereum to businesses experimenting with stablecoins and NFTs, more Canadians are participating in the digital asset economy every year. But with growth comes responsibility, and when it comes to taxes, the Canada Revenue Agency (CRA) has made one thing clear: crypto is taxable, and compliance is not optional.
That clarity, however, hasn’t stopped confusion. Many Canadians are still unsure how crypto is taxed:
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Does it count as income or a capital gain?
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What happens when you trade one token for another?
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How do mining, staking, or NFTs fit into the tax picture?
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What records does the CRA expect you to keep?
This guide — Canada Crypto Tax 2025: The CRA Guide to Compliance — is built to answer those questions. We’ll break down how Canadian tax law applies to crypto, the difference between capital gains and business income, how to calculate what you owe, and the steps you can take today to stay compliant.
At Count On Sheep, we specialize in making crypto taxes easier for both individuals and businesses. We know tax season can feel overwhelming, especially when blockchain transactions add layers of complexity. That’s why this guide isn’t just about rules — it’s about helping you understand how to navigate them. You’ll find straightforward explanations, real-world examples, and compliance tips you can use right away.
Key Points at a Glance
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The CRA treats cryptocurrency as a commodity for tax purposes.
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Crypto transactions may create capital gains or business income.
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Canadians pay capital gains tax on 50% of their taxable capital gains.
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Business income is fully taxable at your marginal tax rate.
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The CRA can track crypto transactions and penalize non-compliance.
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Gas fees, adjusted cost base, and other expenses matter for tax reporting.
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You must include all crypto activity in your tax return.
How the CRA Views Cryptocurrency
The Canada Revenue Agency (CRA) doesn’t see cryptocurrency the same way you might see Canadian dollars in your wallet. Crypto is not legal tender in Canada. Instead, under the Income Tax Act, the CRA treats digital assets as commodities. That classification matters because it means the CRA applies existing property and business tax rules to crypto activity.
Here’s what that looks like in practice:
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Trading crypto assets is a barter transaction. If you swap Bitcoin for Ethereum, it isn’t just a trade — it’s a taxable event.
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Fair market value decides the numbers. The CRA requires you to use the fair market value of the crypto at the time of the transaction, measured in Canadian dollars, when reporting taxable events.
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Tax treatment depends on purpose. The same transaction could be taxed differently depending on whether it generates capital gains or business income.
This distinction is critical. Someone casually holding crypto for investment will generally report capital gains when they sell. But if your activity looks more like a business — for example, frequent trading, mining, or staking as an income stream — then the CRA may classify it as business income. And business income is taxed at 100%, not 50% like capital gains.
In short, how the CRA views your crypto depends on what you do with it. That’s why careful record keeping and clear reporting are so important. Getting the classification wrong can lead to unexpected tax bills — or worse, penalties for non-compliance.
Capital Gains and Business Income
Capital Gains
When you sell crypto as a capital asset, the result is a capital gain or loss.
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Taxable capital gains: 50% of the profit is taxable.
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Capital losses: Can offset capital gains or be carried forward.
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The adjusted cost base (ACB) includes the purchase price and any gas fees incurred.
Example:
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Buy Bitcoin for 10,000 CAD.
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Sell it for 14,000 CAD.
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Profit = 4,000 CAD.
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Taxable capital gain = 2,000 CAD.
Business Income
If crypto activity is frequent and business-like, the CRA may classify it as business income.
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100% taxable at your income tax rate.
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Includes crypto mining taxes, NFT royalties, or frequent trading of crypto assets.
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Business income can be offset by business expenses.
Failing to classify correctly may increase your tax liability and create problems with the CRA.
Taxable Events for Crypto in Canada
A taxable event occurs when crypto changes hands or value is realized. Common taxable events include:
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Selling crypto for Canadian dollars.
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Trading one crypto asset for another.
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Spending crypto on goods or services.
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Earning crypto income (mining, staking, business payments).
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Receiving crypto gifts.
Each of these must be reported on your tax return using the crypto’s fair market value at the time of the event.
How to Calculate Capital Gains Tax
When you sell or trade crypto in Canada, the CRA wants to know if you made a profit. That profit is a capital gain. Here’s how to calculate it step by step:
Step 1: Determine Adjusted Cost Base (ACB)
Your adjusted cost base is what you originally paid for the crypto, plus any fees.
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Purchase price in Canadian dollars
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Exchange or transaction fees
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Network costs (like NFT gas fees at purchase)
This ensures you’re capturing the full cost of acquiring the asset.
Step 2: Subtract Cost Base from Sale Price
Take the sale proceeds (in Canadian dollars, at fair market value) and subtract your ACB.
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If the number is positive, you have a capital gain.
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If it’s negative, you have a capital loss.
Step 3: Apply the Inclusion Rate
Canada taxes 50% of your capital gains. That means if you earn $10,000 in gains, only $5,000 counts as taxable capital gains.
Step 4: Add to Your Total Taxable Income
The taxable portion of your gains is added to your total taxable income. This amount is then taxed according to your marginal tax rate. The more income you have overall, the higher your tax rate may be.
Quick Example
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Bought 1 ETH for $2,000 CAD (including fees).
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Sold 1 ETH for $3,000 CAD.
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Capital gain = $1,000.
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Taxable gain = $500 (50% inclusion rate).
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That $500 is added to your taxable income for the year and taxed at your personal income tax rate.
You don’t pay capital gains tax on the full amount — only 50%. But you still need to track every transaction carefully so you can calculate your adjusted cost base correctly.
Business Income and CRA Classification
Crypto activity may be considered business income if you:
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Trade frequently.
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Operate like a business.
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Promote services or mining crypto taxed commercially.
In these cases, 100% of the profit is taxable. You must report it as other income or employment income, depending on structure.
The CRA decides classification based on facts — not your preference. Misreporting may lead to tax evasion penalties.
Crypto Mining Taxes in Canada
Crypto mining is not tax-free in Canada. The CRA views mining income as taxable, but the way it’s taxed depends on how you mine.
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Business Income vs. Other Income
If mining is commercial—using dedicated rigs, seeking profit, or running a large operation—earnings are treated as business income. This means 100% of the value must be reported and taxed at your regular income tax rate. If you mine casually, on a small scale, it may be considered other income instead. -
Fair Market Value
The coins you mine must be reported at their fair market value in Canadian dollars at the time you receive them. This forms the cost basis if you later sell or trade those coins. -
Deductions and Expenses
Commercial miners can often deduct business expenses, such as electricity, hardware, and maintenance. But these deductions only apply if the CRA agrees your activity qualifies as a business. -
Money Services Business Rules
In some cases, active mining operations may also fall under money services business (MSB) regulations. This can add extra compliance and reporting duties, particularly if you exchange mined coins for fiat currency.
Bottom line: Whether you’re a casual hobbyist or running a large mining setup, mining creates a taxable event. The CRA expects you to report income accurately and keep clear records of your mining activity, expenses, and fair market values.
Tax-Free and Registered Accounts
In Canada, you cannot hold crypto directly inside a Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP). However, you can hold crypto ETFs or funds.
These accounts may provide tax-free growth or tax deferral, reducing your tax bill.
Crypto Transactions and Record Keeping
The CRA requires detailed record keeping for all crypto transactions. Keep records of:
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Dates and times of each trade.
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Canadian dollar value at the time.
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Transaction receipts.
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Wallet addresses.
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Crypto exchanges used.
Without this data, you cannot calculate accurate capital gains or business income.
Tax Forms and Filing Crypto Taxes
When you file crypto taxes, you may need:
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Schedule 3 – Capital gains or losses.
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T1 Tax Return – Individual return.
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T1135 – For foreign holdings of crypto over CAD $100,000 (specified foreign property).
Failing to file correctly may create penalties and interest.
Penalties and Enforcement
The CRA is increasing oversight of crypto taxes in Canada.
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Crypto exchanges may report large transactions.
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Failure to report income is considered tax evasion.
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Penalties include interest charges, audits, and legal consequences.
Being proactive avoids future tax bills or investigations.
Strategies to Lower Your Tax Burden
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Use capital losses to offset capital gains.
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Deduct business expenses against business income.
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Track adjusted cost base to avoid over-reporting.
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Explore spousal tax credit and personal tax allowance for household savings.
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Plan around your marginal tax rate.
These strategies help reduce your overall tax liability.
Conclusion
Crypto taxes in Canada are here to stay. The CRA treats crypto as a commodity and applies existing tax laws to all activity. Whether you earn business income from mining or realize capital gains from selling an NFT, you must pay taxes and file correctly.
At Count On Sheep, we believe in making crypto tax simple. Use crypto tax software, track your fair market values, and report everything to avoid penalties. Staying compliant means you can focus on building wealth — without losing sleep over taxes.
FAQs: Canada Crypto Tax 2025
1. Do I pay capital gains tax on crypto in Canada?
Yes. You pay capital gains tax on 50% of profits from selling crypto assets.
2. How does the CRA classify crypto income?
It depends. Some activity is considered business income, while other activity is capital gains.
3. Are crypto gifts taxable?
Yes. They are a taxable event and must be reported at fair market value.
4. What if I don’t report my crypto income?
Failure to report may be treated as tax evasion and result in penalties.
5. Do I need to report crypto held on foreign exchanges?
Yes, if your foreign holdings exceed CAD $100,000, file T1135.
6. Can I offset capital gains with losses?
Yes. You can use net capital losses to offset capital gains in the same year or future years.
