Learn some general tips about how crypto assets are taxed and how to prepare for your tax filing ahead of the upcoming tax deadline.
Newton and its affiliates do not provide tax, legal or accounting advice. The information contained herein has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction or with respect to any questions you may have in the preparation of your tax returns.
The Canada Revenue Agency (CRA) has made it clear that crypto investors need to report their crypto transactions as part of their annual tax returns. Don’t forget — this date is May 1, 2023, for individual investors and varies for business accounts.
Fortunately, Newton has teamed up with crypto tax calculator Koinly to help you calculate your crypto gains and losses for tax purposes. Tools like Koinly can be particularly helpful if you have many transactions or are unsure how to report your crypto on your tax return.
Many investors were left in the lurch after major crypto exchanges and platforms like FTX and Celsius collapsed throughout 2022. Not only because assets were frozen on the platform as bankruptcy proceedings began, but also due to investors not being able to access their accounts or being unable to export their transaction history.
These records are vital as they provide the record of gains or losses on a platform —and they’ll help you potentially claim any capital losses with the CRA in the future should your assets not be returned to you during bankruptcy proceedings.
It is always a good idea for you to download your records on a regular basis in order to prepare and file your taxes accurately and avoid potential penalties with the CRA.
Losses aren’t all bad news — as you may be able to use them to offset your gains and reduce your tax bill, but you’ll need to act fast. Generally, as long as trading isn’t your full-time profession, the CRA allows you to offset half of your losses each financial year against any gains.
A crypto tax calculator makes this process nice and easy. It can help you keep track of your unrealized gains and losses for each asset, helping you make more informed decisions come tax time.
There are several options for realizing capital losses, such as disposing of them by selling, swapping, spending, or gifting them. Always remember to do your research and, if necessary, consult a tax professional to determine the best option for you and your crypto portfolio.
Although Newton doesn’t support NFTs, we know they are a common holding in a crypto portfolio, and since the hype died down, many investors may be stuck with essentially worthless NFTs due to illiquid markets.
Whether you’re a Bitcoin hodler or have a collection of NFTs, it’s important to understand how taxes work on both, and you may be able to realize and harvest capital losses on your NFT holdings. Check out Koinly’s guide to NFTs and taxes here.
Koinly can help you in preparing to file your tax return — from tracking your realized and unrealized gains to generating your Canada crypto tax report. Here’s how it works.
That’s it — you’re done. If you’d like to learn more about crypto tax — check out the ultimate Canada crypto tax guide.