Canada Crypto Trading Tax Guide 2025

What is Crypto Trading?

Crypto trading involves buying, selling, or exchanging cryptocurrencies. The Canada Revenue Agency (CRA) treats cryptocurrency as a commodity, meaning most trading activities trigger capital gains or losses. Common trading activities include:

• Spot trading: Buying and selling crypto on exchanges (Coinbase, Kraken, Bitbuy, Newton)
• Crypto-to-crypto swaps: Trading BTC for ETH, ETH for SOL, etc.
• Day trading: Multiple trades within the same day
• Swing trading: Holding positions for days or weeks
• Long-term investing: Buy and hold strategies
• DeFi trading: Swaps on Uniswap, SushiSwap, PancakeSwap

CRA Treatment of Crypto Trading

The CRA treats cryptocurrency as a commodity, and for most Canadians, profits from crypto trading are capital gains (not business income).

CRA Guidance on Cryptocurrency

According to CRA guidance:

"Cryptocurrency is a digital representation of value that is not legal tender. It is a digital asset, sometimes also referred to as a crypto asset or altcoin that works as a medium of exchange for goods and services between parties who agree to use it."

What Qualifies as a Disposition?

The following activities trigger capital gains or losses:

• Selling crypto for CAD/fiat - BTC → CAD
• Trading crypto for crypto - BTC → ETH, ETH → SOL
• Using crypto to buy goods/services - Pay with Bitcoin
• Gifting crypto (disposition at fair market value)
• Converting crypto to stablecoins - ETH → USDC (yes, taxable!)

Non-Taxable Events

• Buying crypto with CAD (no tax until you sell)
• Transferring crypto between your own wallets
• Holding crypto (no tax on unrealized gains)

Capital Gains vs Business Income

The distinction is crucial because it affects how much tax you pay:

CRA Factors for Determining Business Income

The CRA considers these factors to determine if trading is business income:

• Frequency of transactions: Very frequent, daily trading
• Period of ownership: Short holding periods (minutes to days)
• Knowledge of markets: Professional trading knowledge/experience
• Time spent: Full-time or substantial time trading
• Financing: Using margin, leverage, borrowed funds
• Marketing: Advertising trading services

Most individuals qualify for capital gains treatment, even with frequent trading. Business income classification typically requires operating a trading business as your primary occupation.

Capital Gains Tax Rates

Canada has a 50% inclusion rate for capital gains, meaning only half of your gains are taxable.

How It Works

Example: You have $10,000 in crypto capital gains

• Taxable amount = $10,000 × 50% = $5,000
• This $5,000 is added to your income and taxed at your marginal rate

2025 Federal Tax Brackets

Note: Add provincial tax rates (varies by province, typically 5-20%)

Effective Capital Gains Tax Rate

Because of the 50% inclusion rate, your effective capital gains tax rate is half your marginal rate:

Adjusted Cost Base (ACB)

The Adjusted Cost Base (ACB) is Canada's method for calculating the cost basis of your cryptocurrency. The CRA requires you to use an average cost method when you hold multiple units of the same cryptocurrency.

How ACB Works

ACB is calculated by dividing the total cost of all acquisitions by the total number of units held.

Example: Basic ACB Calculation

Purchases:

• Jan 2024: Buy 1 BTC for $40,000 CAD
• Jun 2024: Buy 2 BTC for $60,000 CAD each ($120,000 total)

ACB calculation:

• Total BTC: 3
• Total cost: $40,000 + $120,000 = $160,000
• ACB per BTC: $160,000 ÷ 3 = $53,333.33

Sale: Dec 2024, sell 1 BTC for $70,000

• Proceeds: $70,000
• ACB: $53,333.33
• Capital gain: $70,000 - $53,333.33 = $16,666.67
• Taxable gain (50%): $8,333.34

Remaining ACB: 2 BTC with total ACB of $106,666.67 ($53,333.33 × 2)

ACB Adjustments

Your ACB increases with:

• Purchase price of crypto
• Transaction fees (exchange fees, network fees)
• Commissions paid

Your ACB decreases with:

• Proceeds from selling (proportionally)
• Return of capital

Crypto-to-Crypto Trades

Trading one cryptocurrency for another is a disposition and triggers a capital gain or loss.

Example: BTC to ETH Trade

You bought 0.5 BTC for $30,000 CAD in January 2024. In August 2025, when BTC is worth $90,000 CAD, you trade 0.5 BTC for 15 ETH.

Tax treatment:

• Proceeds = Fair market value of 0.5 BTC = $45,000 CAD
• ACB of disposed BTC = $30,000
• Capital gain: $45,000 - $30,000 = $15,000
• Taxable gain (50%): $7,500

Your new ACB for the 15 ETH is $45,000 ($3,000 per ETH).

Stablecoin Trading

Trading crypto for stablecoins is also a disposition:

• ETH → USDC = Disposition of ETH (calculate gain/loss)
• USDC → BTC = Disposition of USDC (usually minimal gain/loss if USDC ≈ $1 CAD)

Superficial Loss Rule

The superficial loss rule prevents you from claiming a capital loss if you (or an affiliated person) repurchase the same or identical property within 30 days before or 30 days after the disposition.

How the Rule Works

If you trigger the superficial loss rule:

• You cannot deduct the capital loss in the current year
• The denied loss is added to the ACB of the repurchased crypto

Example: Superficial Loss

Activity:

• Dec 1: Sell 2 ETH at $5,000 loss (ACB $8,000, proceeds $3,000)
• Dec 15: Buy 1 ETH for $1,400

Result:

• Repurchase within 30 days = superficial loss
• $5,000 loss is denied
• The denied loss is added to ACB of new ETH: $1,400 + $5,000 = $6,400 ACB for 1 ETH

Note: You effectively defer the loss until you dispose of the new crypto outside the 30-day window.

Avoiding Superficial Losses

To claim a loss for tax purposes:

• Wait 30 days after selling before rebuying
• Don't buy the same crypto 30 days before selling at a loss
• Consider buying a different cryptocurrency (e.g., sell BTC at loss, buy ETH instead)

How to Report Crypto Trading on Your Tax Return

Schedule 3: Capital Gains or Losses

Report all crypto dispositions on Schedule 3, which flows to your T1 General income tax return.

Required Information

For each disposition (or group of similar dispositions):

• Description: Type and amount (e.g., "1 BTC")
• Year of acquisition: When you acquired the crypto
• Proceeds of disposition: Sale price in CAD
• Adjusted cost base: Your ACB
• Outlays and expenses: Transaction fees
• Gain or loss: Proceeds - ACB - fees

Reporting Requirements

You must report:

• All dispositions, regardless of gain/loss amount
• Even if your net capital gain is zero
• Foreign exchange gains/losses (crypto bought with USD must be converted to CAD)

Form T1135 (Foreign Income Verification)

If you hold crypto on foreign exchanges with a total cost amount exceeding $100,000 CAD at any time during the year, you must file Form T1135.

• Report specified foreign property (crypto on foreign exchanges)
• Failure to file can result in penalties ($25/day, up to $2,500)

Example Trading Scenarios

Scenario 1: Simple Buy and Sell

Activity:

• Feb 2024: Buy 5 ETH for $15,000 CAD ($3,000 per ETH)
• Nov 2024: Sell 5 ETH for $20,000 CAD ($4,000 per ETH)

Calculation:

• Proceeds: $20,000
• ACB: $15,000
• Capital gain: $5,000
• Taxable capital gain (50%): $2,500

If your marginal tax rate is 40%, you owe $1,000 in tax ($2,500 × 40%).

Scenario 2: Multiple Purchases with ACB

Transactions:

Capital gain calculation:

• Proceeds: $90,000
• ACB: 1.5 × $43,333 = $65,000
• Capital gain: $25,000
• Taxable gain (50%): $12,500

Scenario 3: Crypto-to-Crypto with Multiple Coins

Activity:

• Jan 2024: Buy 10 ETH for $30,000 CAD (ACB: $3,000/ETH)
• Jun 2024: Trade 5 ETH for 0.5 BTC when ETH = $4,000, BTC = $40,000
• Dec 2024: Sell 0.5 BTC for $50,000

Trade 1 (ETH → BTC):

• Proceeds: 5 ETH × $4,000 = $20,000
• ACB: 5 ETH × $3,000 = $15,000
• Gain: $5,000
• Taxable gain: $2,500

New ACB for BTC: 0.5 BTC with ACB of $20,000 ($40,000/BTC)

Trade 2 (BTC → CAD):

• Proceeds: $50,000
• ACB: $20,000
• Gain: $30,000
• Taxable gain: $15,000

Total taxable gains: $2,500 + $15,000 = $17,500

Scenario 4: Superficial Loss

Activity:

• Nov 15: Sell 3 ETH for $6,000 (ACB was $9,000) → $3,000 loss
• Dec 1: Buy 2 ETH for $3,800

Superficial loss rule applies:

• $3,000 loss is denied (within 30 days)
• New ACB for 2 ETH: $3,800 + $3,000 = $6,800 ($3,400/ETH)

The loss is deferred and will reduce your gain when you eventually sell the 2 ETH outside the 30-day window.

Capital Losses

Capital losses can only offset capital gains:

Using Capital Losses

• Current year: Offset against current year capital gains
• Carry back: Apply losses to previous 3 tax years
• Carry forward: Carry losses forward indefinitely to offset future gains
• Cannot offset income: Capital losses cannot offset employment or business income

Claiming Losses from Worthless Crypto

If crypto becomes worthless (exchange bankruptcy, rug pull, token delisted):

• You must demonstrate the crypto is worthless
• Document the loss (exchange bankruptcy filing, project abandonment)
• Claim as capital loss in the year it became worthless

Record Keeping Requirements

The CRA requires you to keep records for 6 years from the end of the tax year to which they relate.

What to Track

• Date and time of each transaction
• Type of transaction (buy, sell, trade, swap)
• Amount of cryptocurrency
• Value in CAD at time of transaction
• Exchange or wallet used
• Transaction fees (add to ACB)
• ACB calculations for each cryptocurrency
• Counterparty (exchange name, individual)
• Purpose (personal investment, business)

How to Track

1. Crypto tax software: Koinly, CoinTracker, CryptoTaxCalculator (all support Canadian ACB calculations)
2. Spreadsheet: Track purchases, ACB, and sales manually
3. CRA resources: Use CRA's sample crypto tracking spreadsheet

Common Mistakes to Avoid

1. Not tracking crypto-to-crypto trades: All crypto swaps are dispositions
2. Using FIFO instead of ACB: Canada requires average cost method (ACB), not FIFO
3. Forgetting to add fees to ACB: Transaction fees increase your cost base
4. Not converting foreign currency: Must convert USD/EUR prices to CAD at time of transaction
5. Claiming superficial losses: Cannot claim loss if you rebuy within 30 days before or after
6. Missing DeFi transactions: DEX swaps, liquidity provision are taxable events
7. Not reporting small trades: All dispositions must be reported, even small amounts
8. Treating as business income incorrectly: Most individuals qualify for capital gains (better tax treatment)

Provincial Taxes

In addition to federal tax, you pay provincial tax on capital gains:

Combined Top Marginal Tax Rates on Capital Gains (2025)

FAQs

Do I pay tax on crypto-to-crypto trades?

Yes. Every crypto-to-crypto trade is a disposition that triggers a capital gain or loss. You must calculate the gain/loss in CAD terms using ACB.

What's the difference between ACB and FIFO?

ACB (Adjusted Cost Base) is an average cost method required in Canada. FIFO (First-In, First-Out) is used in the US. In Canada, you must use ACB, not FIFO.

Can I deduct crypto losses against my salary?

No. Capital losses can only offset capital gains. They cannot offset employment income, business income, or other sources of income. However, you can carry losses back 3 years or forward indefinitely.

What if I day trade frequently? Is it business income?

Probably not. Even frequent traders usually qualify for capital gains treatment (50% inclusion rate). Business income (100% taxable) typically requires operating a professional trading business as your primary occupation. Capital gains treatment is generally more favorable.

How do I convert foreign currency (USD) to CAD?

Use the Bank of Canada exchange rate on the date of the transaction. Most crypto tax software handles this automatically.

Do I need to file Form T1135?

Only if the total cost amount of your specified foreign property (including crypto on foreign exchanges) exceeds $100,000 CAD at any time during the year.

Can I use tax loss harvesting in Canada?

Yes, but the superficial loss rule limits it. You must wait 30 days after selling at a loss before rebuying the same crypto (or don't buy 30 days before). Consider selling one crypto at a loss and buying a different one to avoid the rule.

What if I can't calculate my ACB?

Use crypto tax software like Koinly to automatically calculate ACB from your transaction history. If records are lost, request data from exchanges or use blockchain explorers for on-chain transactions.

Tools and Resources

Crypto Tax Software

• Koinly - Excellent ACB support, Canadian tax reports
• CoinTracker - Good for portfolio tracking with Canadian tax features
• CryptoTaxCalculator - Strong Canadian ACB calculations
• TokenTax - Best for complex DeFi with Canadian support

CRA Resources

• CRA Cryptocurrency Guidance
• T4037: Capital Gains Guide
• Schedule 3 Instructions

Final Thoughts

Canadian crypto trading taxes are relatively straightforward due to the 50% inclusion rate and ACB method, but require diligent record keeping. Key principles:

• Every disposal triggers capital gains/losses (50% taxable)
• Use ACB (average cost method) for calculating cost basis
• Superficial loss rule prevents claiming losses if you rebuy within 30 days (before or after)
• Report on Schedule 3 and keep records for 6 years
• Capital losses can only offset capital gains (carry back 3 years or forward indefinitely)

The 50% inclusion rate makes crypto trading more tax-efficient in Canada compared to countries with higher capital gains rates. However, the superficial loss rule limits tax loss harvesting strategies.

Use crypto tax software with Canadian ACB support to accurately track your transactions and generate tax reports. Proper tracking from the start saves significant time and stress during tax season.