What is cryptocurrency?
A cryptocurrency is a type of virtual asset that is protected using cryptography. It typically uses a system called a blockchain to record and keep a history of transactions. Cryptocurrencies, such as Bitcoin and Ether, are independent, meaning they do not rely on governments, central banks, or other central authorities for backing. You can obtain cryptocurrency in many ways, and new methods are being developed all the time. You can use cryptocurrencies for a wide range of activities, such as buying goods, paying bills, or investing. Transactions involving cryptocurrencies often have tax implications.
Why you need to value your cryptocurrency for your taxes
For income tax purposes, the Canada Revenue Agency (CRA) treats any income you earn from transactions involving cryptocurrency as business income or capital gains, depending on the circumstances. As such, you must declare your earnings on your tax return. You will need to calculate the value of your cryptocurrency to file your tax return.
For GST/HST purposes, if your business accepts cryptocurrency as payment, you will need to calculate the value of the cryptocurrency used for the taxable property or service. Where a taxable property or service is exchanged for cryptocurrency, the GST/HST that applies is calculated based on the fair market value at the time of the sale.
Valuing cryptocurrencies either as capital property or inventory
How you value your cryptocurrencies depends on whether they are considered capital property or inventory. When cryptocurrencies are held as capital property, you must record and track the cost when you acquired them, so that you can accurately report any capital gains when you sell them.
If the cryptocurrencies are considered to be inventory, you can generally value it based on:
• the cost of each item in the inventory when it was acquired; or
• its fair market value at the end of the year.
How to correct your tax affairs
If you did not report your income or capital gains from transactions in cryptocurrency, you may have to pay tax, penalties and interest on that income or capital gain. You can avoid or reduce penalties and interest by voluntarily correcting your tax affairs. To correct your tax affairs (including corrections to GST/HST returns) and to report income that you did not report in previous years, you may:
• Ask for a change to your income tax and benefit return
• Adjust a GST/HST return
• Apply for a correction through the Voluntary Disclosures Program
More information
You can find more information on the tax obligations related to your cryptocurrency activities in the CRA's Guide for cryptocurrency users and tax professionals.
Note: The CRA is currently updating the Guide for cryptocurrency users and tax professionals. Please make sure to stay informed by checking in for the most up-to-date information.
Information on how to report your income or capital gains from cryptocurrency transactions in your tax filings can also be found in CRA guides T4037 Capital Gains and T4002 Self-employed Business, Professional, Commission, Farming, and Fishing Income.
Associated links
• Tax Tip: What is cryptocurrency?
• Tax Tip: Investing in cryptocurrency
• Tax Tip: Mining cryptocurrency
SOURCE: Canada Revenue Agency
-
Related materials:
- 18-Sep-2024 10:23 AM 📒🇨🇦🍁 Using an App or Website to Earn Income? Here's What You Need to Know About the Reporting Rules for Digital Platform Operators 💵
- 16-Sep-2024 12:00 PM 📒🇨🇦🍁 Making Changes to Your Business? The Canada Revenue Agency is Here to Help! 💵
- 18-Jul-2024 04:58 PM 🍁🏙️💵 City Of Toronto's Tax & Utility Relief Programs Provide Support for Low-Income Seniors and Low-Income People Living with Disabilities
- 21-Jun-2024 06:40 PM 📒🇨🇦🍁 Budget 2024 Government of Canada Launches the First Clean Economy Investment Tax Credits 💚💵
- 16-Jun-2024 10:27 AM 📒🇨🇦🍁 You've Got Questions and We've Got Answers! Here are Answers To Seven of the Top Business Tax Information Questions
- 10-May-2024 04:33 PM 📒🇨🇦🍁 Looking for the Fastest and Easiest Way to View and Manage Your Business Taxes Online? Use Our Digital Services!
- 02-May-2024 06:23 PM 📒🇨🇦🍁 Need to Change Your Tax Return? You Can Do it Online!
- 24-Apr-2024 10:21 AM ⚕️💵🚬 Canadian Cancer Society Commends Tobacco Tax And E-Cigarette Tax Increases In Federal Budget 🚭
- 23-Apr-2024 04:28 PM 💵 New Canada Carbon Rebate Estimator Tells You How Much You May Get Back in Payments Starting April 15
- 20-Apr-2024 02:33 PM 📒🇨🇦🍁 The Canada Revenue Agency Has Options for You if You Owe Us Money or Have a Debt That We Collect for Another Government Department
- 19-Apr-2024 06:33 PM 📒🇨🇦🍁 Top 10 Tips for Your Platform Economy Tax Obligations
- 19-Apr-2024 04:24 PM 📒🇨🇦🍁 Reporting Your Capital Gains as a Crypto-Asset User
- 19-Apr-2024 02:34 PM 📒🇨🇦🍁 Are You Self-Employed? The Canada Revenue Agency Can Help You Understand Your Tax Obligations
- 18-Apr-2024 10:19 AM 📒🇨🇦🍁 NEW - Bare Trusts are Exempt from Trust Reporting Requirements for 2023
- 16-Apr-2024 02:27 PM 📒🇨🇦🍁 You Still Have Time - Last-Minute Tips to Help You File Before the Deadline!
- 01-Apr-2024 08:00 AM 💵 Keep The Cash, Care for Climate: Canada Carbon Rebates Being Paid Next Month
- 28-Mar-2024 10:33 AM 📒🇨🇦🍁 Vast Majority of Canadian Businesses Want Fast-Tracking of Clean Energy Tax Credits 🤝💰🤑
- 21-Dec-2023 02:37 PM 📒🇨🇦🍁 Businesses: Here Are the Top Changes this Year that Will Affect Business Taxes in 2024
- 19-Oct-2023 12:00 PM 📒🇨🇦🍁 Did You Know that there are Business Services that Can Make it Faster and Easier for You to Meet Your Tax Obligations?
- 14-Oct-2023 06:33 PM 📒⚠️ Warning: Watch Out for Tax Schemes Involving Multilevel Marketing Businesses!
- 20-Jul-2023 10:21 AM Taxpayers' Ombudsperson Requests That the Canada Revenue Agency Make Improvements to Respect Canadians' Right to Be Represented by a Person of Their Choice
- 05-Jul-2023 02:34 PM TAX TIP Get ready: the CRA is in its summertime benefit period!
- 19-Jun-2023 02:23 PM TAX TIP Applying for the Disability Tax Credit is Easy With Our New Digital Form
- 13-Jun-2023 02:46 PM TAX TIP June 15, 2023, is the Deadline for Self-Employed Individuals to File Their 2022 Income Tax and Benefit Return
- 18-May-2023 12:00 PM ONTARIO JOBS 💵 Moving Forward with Building a Strong Ontario
- 03-Apr-2023 04:33 PM TAX TIP CRA Debt Recovery Activities May Impact Upcoming Benefit, Credit, and Refund Payments
- 27-Mar-2023 10:21 AM TAX TIP Voices Prepares Voice Actors for Tax Season With Tax Education Campaign
- 23-Mar-2023 10:21 AM TAX TIP The CRA Would Like to Remind You That it Has Resumed Debt Recovery Activities; Here's How it May Impact Your Benefit, Credit, and Refund Payments
- 21-Mar-2023 02:33 PM TAX TIP 💵🏠 Less Than Two Weeks to Apply For $500 One-Time Top-Up
- 21-Mar-2023 12:00 PM TAX TIP Do You Work in the Sharing Economy? Here's What You Need to Know
- 18-Mar-2023 10:15 AM TAX TIP Confirm My Representative is Now Available for Business Owners
- 14-Mar-2023 08:20 PM TAX TIP Thinking of Calling Us? Before You Do, Find The Answers You Need for Tax-Filing Season!
- 12-Mar-2023 08:29 PM TAX TIP Ready to File Your Taxes? Here's Why You Should Go Digital
- 13-Feb-2023 02:22 PM TAX TIP Were You Invited to File Your Taxes Over the Phone?
- 09-Feb-2023 08:00 AM TAX TIP Electronic Filing Of Special Elections And Returns Is Now Available
- 30-Jan-2023 06:40 PM 📒🇨🇦🍁Taxpayers' Ombudsperson Recommends Ways To Improve Communication From The Canada Revenue Agency
- 24-Jan-2023 04:18 PM TAX TIP Seniors: We've Got Tips To Help You This Tax Season!
- 19-Jan-2023 04:28 PM TAX TIP Here's what you need to know if you're filing your taxes by paper
- 16-Dec-2022 02:39 PM Budget 2021 The Government Of Canada Launches Formal Consultations To Streamline Reporting Of Payroll Information
- 04-Nov-2022 10:43 AM TAX TIP Six month doubling of GST credit payment starts November 4, 2022
- 03-Sep-2022 10:22 AM Government of Canada Strengthens Access to Sexual and Reproductive Health Services for Youth
- 25-Aug-2022 02:20 PM TAX TIP Do You Have Questions About Filing As A Business For The First Time? The CRA Is Here To Help
- 05-Aug-2022 08:00 AM TAX TIP Here Are Answers To Five Of The Top Business Tax Information Questions
- 16-Jul-2022 08:00 AM TAX TIP Do you have questions about filing as a business for the first time? The CRA is here to help
- 21-Jun-2022 11:14 AM City of Toronto issues 2022 final property tax bills
- 03-Jun-2022 08:00 AM TAX TIP June 15, 2022, is the deadline for self-employed individuals to file their 2021 income tax and benefit return
- 17-Apr-2022 08:00 AM TAX TIP Businesses: Protect yourself from scams and fraud - know what to expect from the CRA
- 15-Apr-2022 02:22 PM TAX TIP Are you self-employed? The Canada Revenue Agency can help you understand your tax obligations
- 13-Apr-2022 12:00 PM TAX TIP How to find help if you can't pay your taxes
- 01-Apr-2022 10:22 AM TAX TIP Did you buy, build, sell or renovate a home in 2021? Here's what you need to know
- 28-Mar-2022 02:02 PM TAX TIP Make sure you maximize the benefits you are entitled to if you are First Nations, Inuit, or Métis
- 27-Mar-2022 12:00 PM TAX TIP It's tax time! You've got questions? We've got answers
- 26-Mar-2022 10:59 AM TAX TIP Do you work in the gig economy? Here's what you need to know
- 23-Mar-2022 04:22 PM TAX TIP How to verify the CRA has contacted you
- 21-Mar-2022 04:33 PM TAX TIP Do you work in the sharing economy? Here's what you need to know
- 20-Mar-2022 04:46 PM TAX TIP Making changes to your business? The Canada Revenue Agency is here to help!
- 19-Mar-2022 10:23 AM TAX TIP Are you a peer-to-peer seller? Here's what you need to know
- 17-Mar-2022 08:38 PM TAX TIP Are you a social media influencer? Here's what you need to know
- 15-Mar-2022 12:00 PM TAX TIP Before you call: Find the answers you need for the 2022 tax-filing season
- 10-Mar-2022 10:22 AM TAX TIP Small and medium business audits: What you need to know
- 11-Feb-2022 12:00 PM TAX TIP Avoid last minute delays at tax time by setting up My Account
- 07-Feb-2022 02:27 PM TAX TIP Investing in cryptocurrency
- 27-Jan-2022 06:33 PM TAX TIP What is cryptocurrency?
- 25-Jan-2022 12:00 PM TAX TIP Running a business is difficult; understanding your tax obligations
- 30-Nov-2021 08:00 AM TAX TIP Avoid last minute delays at tax time by setting up My Account
- 17-Nov-2021 02:14 PM TAX TIP Understanding the tax-free savings account (TFSA)
- 04-Nov-2021 04:33 PM TAX TIP Canada Revenue Agency announces maximum pensionable earnings for 2022
- 20-Jun-2021 05:33 PM TAX TIP Businesses: Watch out for Canada Emergency Wage Subsidy tax schemes
- 02-Dec-2020 12:00 PM TAX TIP What you should know during times of financial uncertainty
- 01-Sep-2020 02:03 PM TAX TIP Warning to Ontarians: Don't be fooled by the senior homeowners' property tax grant
- 30-Aug-2020 09:07 AM TAX TIP Last call! File your 2019 tax return to keep getting your benefit payments
- 29-Aug-2020 12:02 PM TAX TIP Watch out for offshore leveraged insured annuity schemes
- 28-Aug-2020 05:14 PM TAX TIP Watch out for offshore disability insurance plan schemes
- 13-Mar-2020 10:23 AM TAX TIP New online feature helps you see your uncashed tax cheques