Taxes Canada Cryptocurrency Reddit

Taxes canada cryptocurrency reddit

In life only two things are certain : death and taxes.

Taxes canada cryptocurrency reddit

In this post I will try to cover as best as I can the way canadians have to pay taxes on crypto.

DISCLAIMER : Please always consult a lawyer or and accountant before making tax related decisions. This blog is for information only!

When ?
You only pay taxes when you sell your cryptos to fiat (and the fiat is deposited in your bank account).

Since the government can't really know when you sold your crypto to an other crypto they can't really tax it (Unless you are 100% by the book type of person.

Bitcoin Tax Implications and Canada

Then you should keep track of every single crypto to crypto transaction and record your gain/loss at that date).
My advice would be to keep track of your initial cost. Learn to do that HERE.

Taxes canada cryptocurrency reddit

Once you want to cash out the crypto to fiat, just calculate the gain you made at that time (Initial cost - Sell price at cash out date).

The good thing with cryptocurrency is that the transactions are anonymous . The government have no way of knowing when you sold, unless you cash out.

Ethereum fat finger trade

That's why you only get taxed when you cash out in fiat, using this method.

Way of getting taxed?
The question here is : is a Bitcoin inventory (merchandise) or is it a currency (capital property)?
This means that the CRA can use two different methods to tax your crypto.

The CRA has made a statement about that :

Whether a virtual currency such as bitcoin is held as inventoryor as a capital property is also a question of fact.

  • Inventory
    The ARC also stated that if you use your crypto like a merchandise (and not like an investment/capital property) you could potentially pay the normal tax rate.

    You would pay taxes on your profits.

    About Community

    (EX : the same rate used to pay your taxes on your salary, depending on your bracket). Unless you are mining or have lots of activity in crypto, this would be harder to prove as it makes you pay less taxes (since you can deduct expenses).

  • Capital property
    In Canada the ARC stated that gains from any crypto is a capital gain (50% of the gain is taxed.

    Taxes canada cryptocurrency reddit

    EX: Sell for 100 and cost is 50 = 50 gain x 50 % = pay taxes on 25$, depending on your bracket). This second way of getting taxed is more likely for the majority of crypto users, as most of use hold our cryptocurrency like an investment.

Conclusion
Pay your taxes, get out of trouble. Remember that it's not all black or white, and this is a moving industry with laws that are not fixed!

Taxes canada cryptocurrency reddit