Cryptocurrency Tax in Canada — CRA Rules and T1 Reporting

The CRA considers several factors including frequency of transactions, knowledge of securities markets, time spent on trading activities, financing methods, and intention to profit from short-term buying and selling. Occasional transactions are typically treated as capital gains, whilst frequent trading may constitute business income subject to full taxation.

Whilst not explicitly prohibited, holding cryptocurrency in registered accounts like TFSAs or RRSPs is risky. The CRA may consider it carrying on a business within the account, which could cause the account to lose its tax-exempt status and result in significant penalties and taxes.

Staking rewards are generally treated as income when received and must be reported at their fair market value on the date of receipt. This income is added to your total income and taxed at your marginal tax rate. When you later dispose of the staked tokens, any gain or loss is calculated from the fair market value at receipt.

You must maintain detailed records including transaction dates, amounts, fair market values at time of transaction, transaction fees, wallet addresses, and the purpose of each transaction. Keep records for at least six years after the tax year. Poor record-keeping can result in penalties and challenges during CRA audits.