Crypto Tax Accounting Services
Crypto currency has emerged a while back as a digital currency maintained by a decentralized yet organized system, but regulations have yet to be concretized. If you are getting into investing in the crypto realm, you need to be aware of the potential accounting and tax ramifications.
As your accounting partners here at AMACC are well versed and ready to serve all your crypto tax accounting needs. Here is a summary of some of the things you need to know about crypto investing in Canada, and the accounting-tax implications of this type of investment. Read on.
The Tax Requirements of Cryptocurrency in Canada
Although Canada Revenue Agency (CRA) along with their tax professionals have provided new guidance for crypto users in addition to their tax professionals, it can still be a little vague for a new investor. You should head into the tax season fully informed about your crypto investments, income and profits information. After reading this article, you will be much more informed about what you need to do to prepare for your next tax filing season.
Crypto Currency is Taxable in Canada
If you are making money on your crypto investments, just keep in mind that it is not treated as a currency investment per se. Rather, crypto is viewed as a commodity by the CRA; in other words, crypto is like a rental property or stock you may own – a capital property. Therefore, should you dispose of your crypto, and profit from it, you are subject to taxation just as you would be if you disposed of or sold off shares of stock, collectibles such as artwork, or real estate investments you own.
Crypto has quickly gone mainstream, and the CRA has adapted and adjusted their practices accordingly. They clearly have recognized that this commodity needs to be tracked so that investors acknowledge and pay their required tax on the crypto in their portfolio. times.
Since cryptocurrency is considered a commodity in Canada, it means that you could be taxed on your crypto holdings as either income or capital gains.
Crypto is taxed as income – when you are earning and income through its use. If you are using crypto for commercial reasons, it will be taxed as income.
Crypto is taxed as a capital gain – if you sell your crypto on its own, in the eyes of the CRA it is treated, as mentioned previously, as any other investment holding would be. That means that if you make a profit on the sale of cryptocurrency, the government will expect you to pay capital gains tax on the money you made on that investment.
Capital Gains Tax Rate
One rather fortunate aspect of our nation’s tax code is that there is NOT a specific Capital Gains Tax rate. Instead, we use the same rates as our Federal Income Tax rate, and the corresponding Provincial Income Tax rate. This simplifies the calculation somewhat at tax time. Also, it’s important to remember that tax is payable on only half your capital gain.
Crypto Tax Accounting Services
If you are getting into the world of crypto investment, you should be aware of all the tax and accounting implications associated with this cutting edge opportunity. We’re here to help with all your accounting and tax needs.
We hope you have found this summary interesting and useful. Contact us with any comments or questions. We’d love to hear from you.
AMACC
Mahdi Songhori MAcc
