The tax implications of Bitcoin and other cryptocurrency.

Do you earn, spend, or trade cryptocurrency such as Bitcoin? Although your bank doesn’t keep record of these transactions, digital currencies are considered commodities (like oil or gold) by the Canada Revenue Agency (CRA) and Revenu Québec, meaning you’ll need to report your income or losses on your return as you would any other business or investment transaction.

Here are answers to some common questions to help you understand the tax implications of cryptocurrency.

What should I know about reporting my cryptocurrency transactions?

If you used cryptocurrency to buy goods or services, or if you traded one type of digital currency for another (for example, if you exchanged Bitcoin for Litecoin), you’ll need to report these transactions on your return. You’ll need to report the value in Canadian dollars, even if no money was involved.

Depending on the reason for your transactions, you’ll need to report the amount you made (or lost) as business income or as a capital gain or loss.

No matter how you use cryptocurrency, make sure you keep track of:

  • The date of your transactions;
  • Your receipts for purchasing or exchanging cryptocurrency;
  • The value of the cryptocurrency in Canadian dollars at the time of your transaction;
  • Your digital wallet records and cryptocurrency addresses;
  • A description of the transaction and the person or organization you traded with (even if it’s just their cryptocurrency address);
  • The exchange records;
  • Any accounting or legal fees you paid; and
  • The cost of the software you use to manage your taxes.

Be sure to keep all your documents for at least 6 years – the CRA and Revenu Québec can request to see them at any time if your return is selected for a detailed review.

What’s the difference between business income and capital gains?

If you’re reporting your transactions as business income, you’ll need to report the amount you made (or lost) on your 2020 return by using the Statement of business or professional activities form (T2125 and TP-80). Business income is fully taxable, and you can deduct your business losses against other sources of income to lower the amount of taxes you owe when you file your return.

If you’re reporting your transactions as capital gains or losses, you’ll report the amount on Schedule 3 (and Schedule G, if you’re a resident of Québec). If you sold your cryptocurrency for more than you paid to buy it, you have a capital gain. Similarly, if you sold your cryptocurrency for less than you paid to buy it, you have a capital loss. Capital gains are only 50% taxable. If you have a capital loss, you can claim your losses against your gains to lower the total taxable amount. If you have more losses than gains, you can carry the unused amount forward to lower your taxable amount in a future year.

How do I decide how to report my cryptocurrency transactions?

To decide how to report your cryptocurrency transactions, you’ll need to look at the pattern of how you tend to use it. You’ll need to consider factors such as how often you trade cryptocurrencies and how long the period of time is between when you buy and sell your cryptocurrency.

When should I report my cryptocurrency transactions as capital gains or losses?

If you buy cryptocurrency and keep it for a long period of time, therefore treating it as an investment, you might report your transactions as capital gains or losses.

You’ll report your gains or losses on your return whenever you have a disposition (sale or transfer) of cryptocurrency. For example, you might have a disposition when you:

  • Buy goods or services with cryptocurrency;
  • Convert cryptocurrency to money;
  • Exchange one type of cryptocurrency for another; or
  • Make a donation using cryptocurrency.

When should I report my cryptocurrency transactions as business income?

If you’re regularly trading cryptocurrency, holding the currencies for a short period of time, you’re acting the same way as someone in the business of day trading. In this case, you might report your transactions as business income.

Some examples of businesses that involve cryptocurrencies are:

  • Cryptocurrency mining;
  • Cryptocurrency trading; and
  • Cryptocurrency exchanges, including ATMs.

Keep in mind, a single transaction could be considered an adventure in the nature of trade, and therefore business income, especially if it was made in hopes of a quick profit.

If you’re not sure if your transactions were an investment or business income, find an H&R Block office near you and one of our experienced Tax Experts will help you decide. If you’re using our Do It Yourself Tax Software, you can Ask a Tax Expert, too!

If I earned cryptocurrency by mining it, do I need to report it on my return?

If you mined cryptocurrency to sell it for a profit, your transactions are considered business income and you need to report the amount you made (or lost) on your 2020 return.

If you mined cryptocurrency as a hobby, you won’t have to report your activities on your return. However, if you mined cryptocurrency regularly with the intention of selling it for a quick profit, your hobby might actually be considered a business by the CRA and Revenu Québec, meaning you’ll need to report your transactions on your return.

Do I need to charge GST/HST on cryptocurrency transactions?

If your business is registered for a GST/HST number and you normally charge GST/HST on the products or services you provide, you’ll need to charge it on cryptocurrency transactions, too. GST/HST is based on the fair market value at the time of the transaction (or, the highest price in Canadian dollars that the cryptocurrency is worth). 

Earned a small amount of income? Here’s why you should still file a return.

Here’s 5 reasons why you should still file a return, no matter how much income you earned this year.

1. The basic personal amount: a tax credit for every Canadian.

Every Canadian resident is entitled to claim the basic personal amount, a tax credit which reduces the amount of tax you owe. Beginning in 2020, the amount you can claim will depend on your income. However, as long as you earned less than $150,473, you’ll be able to claim the maximum amount of $13,229. This means if you’re reporting less than $13,229 in income, you won’t owe federal taxes this year. You can also claim a corresponding provincial basic personal amount – the amount you’ll receive for this tax credit depends on which province or territory you live in.

2. The Canada employment amount: another tax credit.

You can claim the Canada employment amount if you reported employment income for the year (even if it wasn’t a lot). This amount is designed to help Canadians with some of their work-related expenses such as uniforms, home computers, and supplies they needed to do their job.

In 2020, you’ll be able to claim $1,245 or the total of the employment income that you reported on your return (whichever amount is less). If you’re a resident of the Yukon and you’re eligible for the federal amount, you can also claim an additional $1,245 against your taxes!

Keep in mind, you won’t be able to claim this credit if you’re only reporting self-employment income. You’ll need to report income from a T4 slip to be eligible for the Canada employment amount.

3. You can claim even more provincial tax credits.

The government needs the information from your return to confirm your eligibility for federal benefits like the Canada Child Benefit (CCB) and the GST/HST Credit, as well as provincial benefits like the BC Recovery Benefit and the Ontario Trillium Benefit. If you don’t file a return, you’ll miss out on these payments.

4. Lower the taxes you owe through payroll deductions.

Your employment income is subject to deductions every time you get paid (whether that’s weekly, monthly, or any other frequency). If you’re between the ages of 18 and 65, these deductions include Canada Pension Plan (CPP) or, if you’re a Québec resident, Québec Pension Plan (QPP) premiums. Your payroll deductions also include Employment Insurance (EI) premiums, which all employed Canadians pay, regardless of their age. However, you can claim a non-refundable credit both federally and provincially for these contributions, to lower the taxes you owe!

As a bonus, when you add the amount of your EI contributions and CPP/QPP contributions to the basic personal amount, it increases the amount of income you’ll need to earn before you owe taxes.

5. Build up your RRSP contribution room.

Even if you only earned a small amount of employment income, filing your return builds your future RRSP contribution room. Your RRSP contribution room is increased by 18% of the earned income you report on your tax return. For example, if you report $10,000 of employment income on your 2020 return, you’ll be able to contribute $1,800 more to your RRSP the following year. Even if you don’t want to contribute to an RRSP right now, the extra $1,800 you can contribute might be useful in the future.

What’s new for Canadian taxes in April 2021.

Revenu Québec extended the deadline to pay taxes owing.

If you’re a Québec resident who owes the provincial government money this year, the deadline to pay your balance is now May 31, 2021. This means Revenu Québec won’t charge late-filing penalties or add interest to the amount you owe until June 1, 2021.

Keep in mind, if you received Employment Insurance (EI) benefits or COVID-19 emergency benefits in 2020 and your taxable income was less than $75,000, you won’t have to pay the taxes you owe until April 30, 2022. You still need to file your return by your filing deadline to avoid late-filing penalties.

Revenu Québec will accept electronic signatures on these tax forms from now on.

To make filing your Québec return more convenient, from now on, Revenu Québec will accept electronic signatures for the following forms (no more paper copies needed):

New subscriptions that qualify for the digital news subscription tax credit.

The CRA added over 100 news subscriptions you can claim for the digital news subscription tax credit. To read the full list of eligible subscriptions, visit the CRA website.

2021 federal budget: more benefits, new taxes, and more.

The 2021 federal budget was announced on April 19, 2021. It includes extended COVID-19 emergency benefits, new tax credits, and new taxes. To learn more about the proposed changes, check out this blog.

2021 British Columbia budget: delayed credits, extended credits, and repaying COVID-19 emergency benefits.

The 2021 provincial budget for British Columbia was announced this month. The following changes might impact your tax situation.

Raising the climate action tax credit has been postponed.

The climate action tax credit increase that was scheduled for July 2021 to June 2022 has been delayed until July 2022 to June 2023, because the increase of the carbon tax has also been delayed.

This means for now, you’ll still receive $174 for you and your spouse, and $54 for each of your children (as applicable). Between July 2022 and July 2023, this will be raised to $193.50 for each adult and $56.50 for each child in your household.

Some tax credits have been extended.

The following tax credits have been extended:

You might not have to repay your B.C. emergency benefit for workers.

If you earned at least $5,000 in gross self-employment income (the amount you made before deducting your work-related expenses), you might not have to repay the B.C. emergency benefit for workers anymore.

2021 Manitoba budget: lower education property taxes and more credits.

Here are some changes from the 2021 provincial budget for Manitoba announced this month.

New property tax rebates.

Starting June 2021, you’ll receive the new education property tax rebate before your property tax bill is due every month, to lower the amount you need to pay out of your own pocket. You’ll receive this rebate automatically if you own a home in Manitoba.

This new rebate means the amount you can claim for some of the provincial property tax credits will be lower when it’s time to file your 2021 return:

Tax credit and rebate reductions20202021
Manitoba education property tax credit (EPTC) and advanceUp to $700Up to $545
Seniors education property tax creditUp to $400, minus 1% of your family’s net incomeUp to $300, minus 0.75% of your family’s net income
Seniors school tax rebate (based on the total you receive for the basic and seniors school tax credit)Up to $470, minus 2% on your family’s net income over $40,000Up to $353, minus 1.5% on your family’s net income over $40,000

The farmland school tax rebate will also be lowered from 80% to 60%, meaning you’ll now receive up to $3,750 for this rebate.

If you own commercial property, you’ll receive a 10% rebate of the total school division levy and education support levy.

The new teaching expense tax credit.

The teaching expense tax credit is a new refundable credit for teachers in Manitoba. Like the federal eligible educator school supply tax credit, you can claim 15% of your eligible supplies worth up to $1,000, for a refund of up to $150.

The same supplies that are eligible for the federal educator school supply tax credit are eligible for the Manitoba teaching expense tax credit. This means you can claim what you paid for items like construction paper, flashcards, and art supplies.

Changes to provincial tax credits.

The following credits are now permanent:

The following credits have been extended until December 31, 2022:

  • The cultural industries printing tax credit; and
  • The community enterprise development tax credit.

The highest eligible investment for the small business venture capital tax credit has been raised from $400,000 to $500,000, increasing the highest credit you can receive from $67,500 to $120,000.

Retail sales tax added to more services.

As of December 1, 2021, the retail sales tax will be paid on:

  • Booking fees charged by online accommodation platforms like Airbnb; and
  • Personal services such as hair services, non-medical skin care and aesthetician services, body modifications, and spas.

2021 Québec budget: support for seniors and corporate tax changes.

The 2021 Québec budget included the following changes which might impact your tax situation.

Changes to the tax credit for home support services for seniors.

Beginning in 2022, the Québec tax credit for home support services will gradually increase, while the highest amount of income you can earn to be eligible for this credit will gradually decrease.

Here’s how these changes will be made:

202120222023202420252026
Non-dependent Seniors
Tax credit rate35%36%37%38%39%40%
1st income reduction threshold*$60,135$61,155$62,195$63,250$64,325$65,420
1st reduction rate3%3%3%3%3%3%
2nd income reduction thresholdN/A$100,000$101,700$103,430$105,190$106,980
2nd reduction rateN/A7%7%7%7%7%
Dependent Seniors
Tax credit rate35%36%37%38%39%40%
Income reduction threshold*$60,135$61,155$62,195$63,250$64,325$65,420
Reduction rate3%3%3%3%3%3%

* The highest income you can earn while being eligible for this credit.

Starting immediately, seniors living in an apartment can now claim up to $1,200 for their monthly rent (the previous limit was $600). If they’re 70 or older, the lowest monthly rent they can claim for this credit is now $600. This means that even if their actual rent is lower than $600 per month, they’ll be able to claim $600 on your return.

Also beginning in 2022, seniors living in an apartment who don’t apply for this credit on their return will automatically receive it! The amount they receive will be based on the minimum eligibility requirements, not their actual tax situation.

Lower small business tax rate.

As of March 21, 2021, the small business tax rate will be lowered from 4% to 3.2% on the first $500,000 of business income. The dividend tax credit for non-eligible dividends has also changed, with the gross-up rate lowered from 4.01% to 3.42% for non-eligible dividends received after 2021.

Other corporate tax measures.

Other corporate tax measures were also announced, including:

2021 Saskatchewan budget: more credits for families, lower taxes for small businesses.

The 2021 provincial budget for Saskatchewan was announced this month, including the following changes.

The active families benefit is back.

The active families benefit is back. This is a refundable tax credit meant to help families pay for their children’s activities, beginning in January 2021.

Like before, families whose yearly household income is less than $60,000 can claim up to $150 (or $200 for children with disabilities) for fees to register in cultural activities, recreational activities, or sports. Be sure to keep your receipts!

New Saskatchewan home renovation tax credit.

The Saskatchewan home renovation tax credit is designed to make the improvements you need for your home more affordable. You can claim expenses for home renovations that began in October 2020 on your 2021 tax return.

Saskatchewan technology start-up incentive extended.

The Saskatchewan technology start-up incentive has been extended until 2026. This is a non-refundable tax credit for Saskatchewan-based individuals or businesses who invest in early-stage technology start-ups, worth up to 45% of the amount they invested.

Raising the small business tax rate.

The small business tax rate was lowered to zero in October 2020. It will be raised to 1% on July 1, 2022, and raised again to 2% on July 1, 2023.