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“I invested some money in cryptocurrency. I didn’t take any out so there is nothing to report on my personal taxes, right?!?”
The answer. It depends...like most things in tax.
If you invested in one type of coin, or multiple for that matter, but didn’t do any trading between different types of coins, then there is no tax event to report.
If you bought Bitcoin, sold it during the year and then immediately bought Ethereum, then you have a taxable event to report. This is still the case even though the original investment money stayed within the cryptocurrency account or wallet.
The next question is always how is it reported? Is it considered business income? Or a capital gain? And the answer is...it depends, again. If CRA believes that you are a day-trader (i.e. buying/selling often), then it could be considered business income, but if you are only trading a few times a month, it would likely be considered capital gains and be subject to the 50% capital gains tax inclusion rules.
Either way, Crypto is a highly evolving tax area and one that is earmarked for lots of CRA audits. Our recommendation is that if you have Cryptocurrency in any capacity, you seek Professional Advice and often.
One resource that we found easy to read and helpful was Digital Currencies And Tax In Canada: A Brief Overview by a fellow colleague, Candy M. Davis, CPA, CGA. We hope you check it out and find it just as helpful in understanding the crypto basics.
Have a question? Email or call us. And remember to check out our blogs, checklists and social media pages for more information on all things small business, tax, accounting and the Tri-Cities community.
***This blog is for information only and not to be used as tax advice or planning without first seeking professional advice. Information is subject to change without notice.