By Jeremy Koven on June 24, 2022
Estimated reading time: 4 minutes

What records do crypto investors need for taxes?

By Jeremy Koven on June 24, 2022
Estimated reading time: 4 minutes

If you buy and sell cryptocurrency, your earnings are considered either business income or capital gains. Find out what records you need to keep for taxes.

A pile of gold coins with different cryptocurrency logos

Photo by Kanchanara from Unsplash

I invest in crypto as a business. What records do I need to keep for my income taxes?
—Marc

There are a few layers to this question, Marc, so I’ll break down the answer into three parts: business income vs. capital gains, what records the Canada Revenue Agency (CRA) might ask for, and a few tips for tax time.

1. Are your crypto earnings business income or capital gains?

Here’s why the distinction matters: In Canada, business income and capital gains are taxed differently: 100% of business income is taxable, while only 50% of capital gains are taxable.

If you invest in bitcoin, ethereum or other cryptocurrencies, you may be wondering which activities are taxable. Buying and holding crypto isn’t a taxable event, nor is transferring crypto between two wallets you hold. But if you cash it out, sell it, spend it (including buying a different crypto) or give it away, that’s taxable.

To determine if your crypto earnings should be taxed as business income or capital gains, the CRA looks at different aspects of your trading activity, such as:

How frequently you buy and sell crypto
Your intentions when buying crypto
How long you hold on to crypto assets
The amount of time you devote to crypto trading activities
Any business-related activities, such as preparing a business plan or promoting a service

“Business activities normally involve some regularity or a repetitive process over time. Each situation has to be looked at separately,” the CRA says on its website. “In some cases, a single transaction can be considered a business, for example when it is an adventure or concern in the nature of trade. Whether you are carrying on a business or not must be determined on a case by case basis.”

Learn more about how the CRA views cryptocurrency trading, as well as crypto mining and crypto staking, and bookmark MoneySense’s guide to crypto and taxes.

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2. What crypto records might the CRA ask for?

Whether your crypto activity is considered a business, an investment or a hobby, you must keep detailed records for the previous six years, including:

Dates of crypto transactions
Cryptocurrency addresses involved in each transaction
Transaction IDs (assigned by the crypto network)
Receipt for each crypto purchase or transfer
Prices of the crypto in Canadian dollars when you made the transaction
Description of each transaction and the receiving party’s address
Transaction records for all of the crypto exchanges or trading platforms you use
Transaction records for all of your crypto wallets
Legal and accounting costs, including tax software

If you are a crypto miner, you will need to keep the following records:

Receipts for cryptocurrency mining hardware
Receipts for all expenses associated with your mining operation
Mining pool contracts and records
Any other records related to your mining activities
Records of dispositions of cryptocurrency earned through mining

3. Crypto and tax tips

You can track the information listed above using a spreadsheet or a crypto portfolio tracker app.

Remember, trading one crypto for another, cashing out your coins, buying goods or services with crypto, and gifting crypto are all taxable events. Keep close track of the coin ledger so that you can pull all related information, including transaction types, dates and the values of the cryptocurrencies in Canadian dollars. This is considerably simpler if you use a single crypto exchange or trading platform.

In Canada, the deadline to file a personal income tax return is April 30 each year. If you or your spouse is self-employed, the filing deadline is June 15, but any taxes owing are still due April 30. (Read more about income taxes.)

It’s illegal not to report income—including crypto income—and you’ll owe interest and perhaps penalties on overdue taxes, so don’t wait for the CRA to come knocking. If you need help to figure out your tax liabilities, it’s a good idea to consult a tax professional sooner rather than later.

Jeremy Koven is the Chief Operating Officer and a co-founder of CoinSmart, a Canadian cryptocurrency trading platform. Sign up for an account* with the code money30 and receive CAD$30 in bitcoin when you deposit a minimum of CAD$100.

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