Do you know your Bitcoin tax rate from your ETH tax rate? The Canada Revenue Agency taxes all crypto as either income or a capital gain - and they’re sending a clear message that crypto investors need to calculate their crypto taxes correctly and pay their dues. Learn about Canadian crypto tax rates for 2022 and how to calculate yours.
Know what your Bitcoin tax rate is? How about other cryptocurrency tax rates for popular coins like ADA, ETH or BNB?
It’s important you do. The Canada Revenue Agency (CRA) has stated they’re working with large crypto exchanges based in Canada like Coinsquare to share customer information and ensure crypto investors are paying their fair share in crypto taxes.
The best way to avoid an unwelcome audit from the CRA is to understand your crypto tax rate, calculate your crypto taxes accurately and report this to the CRA.
But crypto tax rates aren’t as simple as Canadian investors might like. This is because crypto doesn’t have an exclusive tax rate. Instead, it’s subject to Capital Gains Tax or Federal Income Tax - as well as Provincial Tax - depending on how the CRA views your crypto investments.
Because of this, your crypto tax rate depends on a variety of factors. We’ll be breaking it down for you in this guide.
Like many other tax offices, The Canada Revenue Agency doesn’t view cryptocurrency as a currency. Instead, it views it as a commodity - similar to a property or an asset.
When it comes to crypto taxes, Canada hasn’t quite followed the same pattern as many other countries and it’s guidance is vague to say the least. The way you’ll be taxed depends on whether the CRA sees your cryptocurrency investments as business income or a capital gain.
If it’s seen as business income, you’ll be taxed on 100% of your income or profits at the same Federal and Provincial Tax Rate you are on other income.
If your crypto investments are seen as capital gains, you’ll only pay tax on 50% of your total gains.
The tax year in Canada runs from the 1st of January 2022 to the 31st of December 2022. There are some important dates you need to know about:
1st January 2022: 2022 tax year starts.
30th April 2022: Deadline for tax returns for the previous year (2021).
15th June 2022: For self-employed taxpayers, this is your deadline to submit 2021 tax returns. However, the balance due must still be paid by the 30th of April 2022.
31st December 2022: 2022 tax year ends.
30th April 2023: Deadline for 2022 tax returns.
The CRA’s guidance on what is considered business activity isn’t too specific. They say the following points are commons signs that you may be conducting business activities:
Their own example of crypto business activity is a crypto investor who is actively and regularly trading in cryptocurrency and intends to profit from their activities, like a day trader. With this understanding, many Canadian crypto investors are likely to be viewed as conducting business activities.
The CRA determines whether investors are carrying on business activities on a case by case basis. All crypto investors can do is file their taxes accurately and let the CRA decide whether they view it as a business activity or a capital gain.
All this to say, many crypto transactions can be viewed as income in Canada. This includes:
If you’re earning crypto income, you’ll pay the same rate of tax on it as you do your other income. Both your Federal and Provincial Income Tax rates will apply.
All Canadian taxpayers get a personal tax allowance, also known as the basic personal amount (BPA). This is a non-refundable tax credit of $13,808.
Anyone who is employed and is liable to pay both Federal and Provincial Tax can claim the BPA and pay no tax on $13,808 of their earnings.
The CRA has confirmed this increases to $14,398 for 2022 2022 and $15,000 in 2023.
In Canada, you’ll pay a Federal Tax Rate, as well as a Provincial Tax Rate (unless you live in Quebec - find yours here).
The Provincial Income Tax Rates follow the same structure as the Federal Tax Rate. Canada uses a gradual income tax system, so you won’t pay the same rate on all your taxable income. Instead, you’ll pay a different percentage on each ‘chunk’ of your earnings, as you move up the Federal Income Tax rate bands.
You live in Vancouver, British Columbia.
You earn $60,000 in taxable income from your job - you’ve already deducted your personal allowance. You also earn $20,000 in crypto income.
This puts you in the 20.5% Federal Tax Rate band for your crypto earnings.
Your Provincial Tax Rate band is 7.7%.
20.5% + 7.7% = 28.2%. This is your crypto tax rate.
28.2% of $20,000 is $5640. This is what you’ll pay in taxes.
Because cryptocurrency is viewed as a commodity, when you dispose of it by swapping, selling or spending it, this is seen as a disposition of an asset - which makes it subject to Capital Gains Tax. Dispositions in Canada include:
Your whole asset won’t be subject to Capital Gains Tax, only any profits from disposing of it.
Canada taxes short and long-term gains at the same rate. However, you’ll only pay Capital Gains Tax on 50% of your gains!
This rule works both ways though, so it applies to your losses too. You can only offset half your losses against half your capital gains when calculating your net capital gains.
Canada doesn’t have a specific Capital Gains Tax. Instead, your crypto tax rate on your gains will be the same as your Federal and Provincial Income Tax rates. Remember, you’ll only pay it on half your gains.
You live in Vancouver, British Columbia.
You earn $60,000 in taxable income after you deduct your personal allowance. You made a capital gain of $15,000 and a capital loss of $2,000.
You take 50% of your capital gain ($7,500) and deduct 50% of your capital loss ($1,000) leaving a net capital gain of $6,500.
Your Federal Tax Rate is 20.5%. Your Provincial Rate Rate is 7.7%.
20.5% + 7.7% = 28.2%. This is your crypto tax rate for capital gains.
28.2% of $6,500 =$1,833. This is how much you'll pay in tax.
Yes, there are some crypto transactions that you’ll pay no Income Tax or Capital Gains Tax on at all in Canada. These include:
The tax deadline in Canada is the 30th of April 2022. Though the CRA gave taxpayers a grace period to file taxes in 2021 due to the Covid-19 pandemic, this will not be the case for 2022.
Before you get to filing your taxes, you need to calculate your crypto taxes.
This means identifying which of your transactions are subject to Income Tax and which are subject to Capital Gains Tax. It also means going through each transaction to identify the FMV on the date you purchased and disposed of the asset. For crypto investors who are trading multiple assets regularly, this all starts to become a lot of hard work.
Crypto tax software like Koinly can help make this step simple. It calculates your crypto taxes for you and puts it into easy-to-read tax reports, so all you need to do is submit your taxes to the Canada Revenue Agency.
For crypto capital gains, you need to report these using a Schedule 3 Form.
For crypto income, these should be included in your Income Tax Return T1.
You can file both of these online using CRA's My Account.
You can find more helpful crypto tax advice in our Canada Crypto Tax Guide.
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