Canadian Tax Treatment of Cryptocurrency: Complete Guide for 2025

• DATE: 13 12 24
• BY: Stellan Marwick

Buying Bitcoin in Canada doesn’t trigger a tax bill. But selling it? That’s when the Canada Revenue Agency (CRA) steps in. If you’ve traded, sold, or used crypto to buy anything, you owe taxes. And if you mined, staked, or got airdrops, you’re on the hook for income tax too. The CRA doesn’t treat cryptocurrency like cash. It treats it like property. That means every time you move crypto - even swapping one coin for another - you might have to pay tax. For 3.2 million Canadians who own crypto, this isn’t optional. It’s law.

How the CRA Classifies Crypto: Property, Not Currency

The CRA made this clear back in 2013, and it hasn’t changed. Cryptocurrency isn’t money. It’s not foreign currency. It’s a digital asset - a commodity. That means every transaction involving crypto is treated like selling a stock, a car, or a piece of art. You don’t pay tax when you buy Bitcoin with Canadian dollars. You pay tax when you sell it, trade it, or use it to buy coffee. The moment you dispose of it, the tax clock starts ticking.

This isn’t just theory. In 2025, the CRA released draft legislation reinforcing this stance. They’re cracking down on people who think holding crypto is tax-free forever. The message is simple: if you didn’t report your trades, you’re at risk.

Two Ways Crypto Gets Taxed: Capital Gains vs. Business Income

There are only two ways your crypto profits get taxed in Canada: as capital gains or as business income. The difference matters - a lot.

Capital gains apply if you bought crypto as an investment. You hold it, wait for it to go up, then sell. Only 50% of your profit is taxable. So if you bought $10,000 worth of Ethereum and sold it for $25,000, your gain is $15,000. The CRA taxes only $7,500 of that. That’s your taxable capital gain.

Business income applies if you’re trading frequently, running a mining operation, or getting paid in crypto for services. In this case, 100% of the value is taxable. If you mine Bitcoin and sell it for $20,000, the full $20,000 is added to your income. No 50% discount. No breaks.

How does the CRA decide which category you’re in? They look at your behavior. Did you trade 50 times in a year? Did you use automated bots? Did you quit your job to trade full-time? If yes, you’re likely running a business. And that means higher taxes.

What Counts as a Taxable Event?

Not every crypto action triggers tax. Here’s what does:

• Selling crypto for Canadian dollars
• Trading one crypto for another (e.g., BTC for ETH)
• Using crypto to buy goods or services
• Receiving crypto as payment for work or services
• Getting crypto from mining, staking, or airdrops
• Receiving crypto as a reward from a platform (like Coinbase Earn)

Here’s what doesn’t:

• Buying crypto with CAD
• Holding crypto without selling
• Transferring crypto between your own wallets
• Receiving crypto as a gift (but selling it later triggers tax)

That last one trips people up. If your uncle sends you 0.5 BTC as a gift, you don’t pay tax then. But if you sell it for $30,000, you owe tax on the full gain - based on the fair market value at the time you received it.

How Much Tax You Actually Pay

Canada uses a progressive tax system. The more you earn, the higher your rate. For 2025, federal rates are:

• 15% on income up to $55,867
• 20.5% on income between $55,868 and $111,733
• 26% on income between $111,734 and $173,205
• 29% on income between $173,206 and $246,752
• 33% on income over $246,752

Then add provincial taxes. In Ontario, for example, you pay up to 13.16% extra on top of federal. In Quebec, it’s even higher - up to 25.75% on income over $121,375.

Let’s say you’re in Ontario and made $100,000 in capital gains from crypto. You pay tax on half of that - $50,000. Your federal tax on $50,000 is about $9,000. Your provincial tax is about $4,300. Total: $13,300.

Now, if that same $100,000 was business income, you pay tax on the full amount. Federal tax: $22,000. Provincial tax: $10,000. Total: $32,000. That’s nearly triple the tax.

Tax Loss Harvesting: Legal, But With Rules

Lost money on crypto? You can use that to reduce your tax bill. This is called tax loss harvesting. Sell a coin at a loss, and use that loss to offset gains you made elsewhere.

But there’s a catch: the superficial loss rule. If you sell Bitcoin for a loss and buy it back - or buy a similar coin - within 30 days before or after, the CRA ignores the loss. It’s disallowed. You can’t just sell and rebuy to claim a deduction.

Also, only 50% of your capital loss is deductible. If you lost $10,000, you can only use $5,000 to offset gains. That’s the same as the capital gains inclusion rate. So if you had $15,000 in gains and $10,000 in losses, your taxable gain is $10,000 - not $5,000. Because $5,000 of your loss is disallowed.

People who do this right save thousands. Those who ignore the 30-day rule get audited.

How to Report Crypto on Your Tax Return

You report crypto gains on Schedule 3 of your T1 tax return. That’s where you list capital gains and losses. You need to calculate your adjusted cost base (ACB) - what you paid for the crypto, including fees - and your proceeds of disposition - what you got when you sold it.

Business income from mining or staking goes on Form T2125. You report revenue and expenses. Electricity for mining? Deductible. Hardware depreciation? Deductible. Software subscriptions? Deductible.

Here’s the kicker: you need records for every transaction. Date, amount, value in CAD, what you bought or sold, and the platform. If you used 3 exchanges, 2 wallets, and 1 DeFi protocol, you’ve got a spreadsheet with hundreds of lines.

Most people use crypto tax software. Koinly and CoinLedger are popular because they pull data directly from exchanges and generate CRA-ready reports. TurboTax Canada’s crypto tools? Many users say they’re incomplete. The software can’t handle complex DeFi trades or cross-chain swaps. If you’re doing anything beyond simple buys and sells, don’t trust TurboTax alone.

What Happens If You Don’t Report

The CRA is watching. Crypto audits rose 37% from 2023 to 2024. They’re cross-referencing exchange data with tax returns. If Wealthsimple reports you sold $50,000 in crypto and you didn’t report it - you’re on their radar.

Penalties are steep:

• 5% of the tax owing, plus 1% per full month late (up to 12 months)
• 10% of the tax owing if the CRA finds gross negligence
• Reassessment of past returns - up to 10 years back
• Interest charges on unpaid taxes

In 2025, the CRA’s own audit review found that 73% of crypto tax returns had material errors. The top mistakes? Wrong cost basis (42%), calling capital gains business income (31%), and ignoring foreign exchange activity (27%).

Don’t think you’ll get away with it. The CRA has access to data from Canadian exchanges. They’re also working with international agencies to track off-shore activity.

What’s Changing in 2025 and Beyond

Canada is moving toward more transparency. The August 2025 draft legislation proposes mandatory reporting for all crypto transactions over $10,000. That’s similar to the U.S. IRS rules. Exchanges will have to report these to the CRA. That means even if you think you’re hiding behind a foreign exchange, the CRA will know.

By 2027, the Department of Finance estimates these new rules will bring in $285 million extra in tax revenue each year. That’s not small change. It’s a signal: compliance is coming.

Meanwhile, 87% of major Canadian exchanges - Wealthsimple, Coinsquare, Bitbuy - now provide CRA-compliant tax statements. That’s up from 62% in 2022. The tools are here. You just need to use them.

Real People, Real Mistakes

On Reddit, one user spent 47 hours preparing their 2024 crypto taxes after trading across five exchanges. They called it a "bureaucratic nightmare." Another saved $3,200 by harvesting losses and staying within the 30-day rule.

A 2025 Abacus Data survey found 54% of Canadian crypto owners feel unprepared. 29% admitted to incomplete reporting on their last return. That’s nearly one in three people risking penalties.

And tax professionals? 68% of CPA Canada’s survey respondents say the system is too complex for average people. But that doesn’t mean you get a pass. The law still applies.

What You Should Do Now

Here’s your checklist for 2025:

1. Collect all transaction records from every exchange and wallet you used.
2. Use crypto tax software (Koinly or CoinLedger recommended).
3. Classify each transaction: capital gain or business income?
4. Calculate your adjusted cost base for every coin you own.
5. Check for superficial losses - don’t rebuy within 30 days.
6. Report capital gains on Schedule 3, business income on T2125.
7. Keep records for six years. The CRA can audit you anytime.

If you’re unsure, hire a tax pro who specializes in crypto. Don’t guess. The cost of a mistake is far higher than the cost of a consultation.

The rules aren’t going away. They’re getting stricter. The question isn’t whether you’ll be taxed - it’s whether you’ll pay the right amount.